U.S. stocks tumbled on Tuesday after a batch of upbeat economic data raised concerns that an inflation rebound could slow down the Federal Reserve’s pace of monetary policy easing. Canadian stocks were dragged lower by the weak sentiment, but losses were more subtle thanks largely to gains in the energy sector.
Stocks gave up early gains after a Labor Department report showed U.S. job openings unexpectedly increased in November, while a separate report said services sector activity accelerated in December with a measure tracking input prices surging to a near two-year high.
“Markets are starting to recognize that they thought we were in the eighth inning of the inflation fight but now it’s going to be higher for longer,” said Joe Mazzola, head of trading and derivatives strategist at Charles Schwab.
Benchmark 10-year U.S. Treasury yields hit 4.699% after the data pointed to a strong economy, the highest since April 26. Canadian bond yields largely tracked the rise in their American counterparts.
“The yields on the U.S. Treasuries are running the show,” said Allan Small, senior investment advisor of the Allan Small Financial Group with iA Private Wealth.
Signs of continued resilience in the economy have pushed back expectations on when the U.S. central bank can deliver its first interest rate reduction this year. Traders now see the next cut more likely in June and the Fed staying on hold for the rest of 2025, according to the CME Group’s FedWatch tool.
Concerns over the impact of possible tariffs by the incoming Trump administration on consumer prices have also been on investors’ minds.
The Dow Jones Industrial Average fell 178.20 points, or 0.42%, to 42,528.36, the S&P 500 lost 66.35 points, or 1.11%, to 5,909.03 and the Nasdaq Composite lost 375.30 points, or 1.89%, to 19,489.68.
Higher yields pushed technology-sector stocks lower by 2.39%. Shares of AI bellwether Nvidia fell 6.22%. Higher long-term rates reduce the value to investors of the cash flows that technology and other high-growth companies are expected to produce.
Most of the 11 S&P 500 sectors declined, except for health care and energy stocks.
The S&P/TSX composite index ended down 69.90 points, or 0.3%, at 24,929.89, adding to Monday’s decline.
The Toronto market’s technology sector fell 3.1%, including a decline of 6.3% for the shares of e-commerce company Shopify Inc.
Real estate in Toronto fell 0.7% and heavily weighted financials were down 0.3%.
Energy added 1.7% as the price of oil settled 0.9% higher at US$74.25 a barrel.
Among U.S. stocks, Tesla shares fell 4% after BofA Global Research downgraded the stock to “neutral” from “buy.”
Micron Technology rose 2.67% after Nvidia boss Jensen Huang said the chipmaker was providing memory for the AI bellwether’s GeForce RTX 50 Blackwell family of gaming chips.
Citigroup rose 1.29% on bullish coverage from Truist Securities, while Bank of America went up 1.5% after positive ratings from at least three brokerages. Some big banks are expected to report quarterly earnings in the next week.
Declining issues outnumbered advancers by a 2.14-to-1 ratio on both the NYSE and the Nasdaq. The S&P 500 posted nine new 52-week highs and 16 new lows while the Nasdaq Composite recorded 60 new highs and 58 new lows. Volume on U.S. exchanges was 20.45 billion shares, compared with the 12.52 billion average for the full session over the last 20 trading days.
Markets in the U.S. will be closed on Thursday for a national day of mourning to mark the death of former President Jimmy Carter.
Reuters, Globe staff