US stocks edged lower on Wednesday as investors grappled with mixed economic data and reports suggesting President-elect Donald Trump might declare a national economic emergency. The uncertainty kept Wall Street in a cautious mood, with traders looking ahead to key economic developments later this week.
By mid-morning, the Dow Jones Industrial Average was down 117.37 points (0.28%) at 42,410.99. The S&P 500 slipped 6.27 points (0.11%) to 5,902.76, while the tech-heavy Nasdaq Composite declined 9.11 points (0.05%) to 19,480.57. The Russell 2000, a gauge of small-cap companies, fell 1.5%, reflecting broader unease among investors.
Mixed signals from labour market data
Markets were jolted by contrasting employment reports. The ADP National Employment Report revealed slower-than-expected private payroll growth in December, while the Labour Department reported a decline in weekly jobless claims.
“It feels like one report contradicts the other,” said Sam Stovall, Chief Investment Strategist at CFRA. “The fall in jobless claims suggests more people are finding work, but the ADP data indicates fewer new jobs were created than anticipated. Investors are trying to make sense of what this means for the broader economy and Friday’s payroll figures.”
The labour market’s resilience continues to support the Federal Reserve’s stance on holding interest rates steady. However, traders are now anticipating the first rate cut of 2025 to occur as late as May or June, based on projections from the CME Group’s FedWatch Tool.
Sector performance and market movers
Market performance was uneven across sectors, with the utilities sector leading the losses, down 1%. Rising Treasury yields, which have reached multi-month highs, weighed heavily on utility stocks.
Megacap stocks showed mixed results: Nvidia gained 1.8%, Alphabet remained flat, and Meta dropped 0.7%. Advanced Micro Devices fell 3.8% after HSBC downgraded the stock from “buy” to “reduce,” reflecting cautious sentiment in the tech sector.
Quantum-computing firms saw dramatic declines following comments from Nvidia CEO Jensen Huang, who suggested that practical quantum computers might be decades away. Rigetti Computing plummeted 41.5%, IonQ slid 36.5%, and Quantum Computing Inc. dropped 40.6%.
Trump’s economic emergency plan sparks concern
Adding to market jitters, CNN reported that President-elect Trump is considering invoking the International Economic Emergency Powers Act to impose new tariffs on imports. The act, which allows a president to regulate trade during a national emergency, could pave the way for aggressive tariff programmes.
The possibility of steep surcharges on trade partners has amplified concerns about inflation and the potential for a global trade war. Trump’s broader economic agenda, including mass deportations and tax cuts, has further unsettled investors.
“Reports of tariffs and mass deportations are fuelling fears of inflation and potential supply chain disruptions,” said one market analyst. “Uncertainty around these policies is keeping investors on edge.”
Inflation and fed policy
Investor sentiment was further weighed down by worries about inflation, which have been heightened by recent upbeat economic data. On Tuesday, these concerns led to sharp declines in the S&P 500 and Nasdaq, with both indices experiencing their steepest losses since the Federal Reserve’s cautious December meeting.
More Read
Fed Governor Christopher Waller expressed optimism about inflation continuing to decline in 2025, paving the way for more interest rate cuts. However, he cautioned that the pace of these cuts would depend on how the economy evolves.
Market breadth and trading activity
Declining stocks far outnumbered advancing ones, with a 3.88-to-1 ratio on the NYSE and a 4.22-to-1 ratio on the Nasdaq. The S&P 500 recorded four new 52-week highs and 24 new lows, while the Nasdaq Composite reported 20 new highs and 78 new lows.
Looking ahead
Markets will remain closed on Thursday as the nation observes a day of mourning for former President Jimmy Carter, who passed away on December 29 at the age of 100.
Investors are now focused on Friday’s nonfarm payrolls report, which is expected to provide further insights into the state of the labour market and its implications for monetary policy. Economists surveyed by Reuters forecast an addition of 160,000 jobs in December, down from 227,000 in November.
As Wall Street grapples with data-driven uncertainty and the potential fallout from Trump’s economic plans, caution remains the dominant sentiment.
