By Johann M Cherian and Sukriti Gupta(Reuters) – U.S. stock index futures declined on Monday as yields surged following robust payroll numbers released last week, strengthening expectations that the Federal Reserve will uphold a hawkish stance for much of 2025. At 07:21 a.m. ET, Dow E-minis were down by 107 points, or 0.25%, S&P 500 E-minis were lower by 45.25 points, or 0.77%, and Nasdaq 100 E-minis saw a decrease of 243.25 points, amounting to a 1.16% drop. Futures linked to the domestically sensitive Russell 2000 index retreated by 1.1% to reach their lowest level since September 2024. The index experienced a decline of over 2% into correction territory on Friday following the release of the payroll data, compared to the intraday high it had reached in late November. Wall Street’s fear index reached a more than three-week high on Monday.
The main indexes on Wall Street recorded their second consecutive week of losses in the previous session after several reports, including those on employment and services activity, surpassed expectations, raising concerns that inflation might be on the rise in the world’s largest economy. Investors also factored in the potential impact of policies expected under the incoming Donald Trump administration, such as tariffs and stricter measures on illegal immigration, which could pose threats to global trade and contribute to price pressures, especially at a time when the Federal Reserve has hinted at an uncertain outlook for monetary policy. Trump is set to assume office on Jan. 20. Despite an initial spike, yields on longer-dated Treasury bonds remain at multi-month highs. Interest-rate futures now indicate only 26 basis points of cuts by December this year, according to data compiled by LSEG.
“The strong labor market, coupled with the recent uptick in inflation, are both complicating the Federal Reserve’s rationale for further rate cuts,” noted David Morrison, a senior market analyst at Trade Nation in a statement. “Inflation had already begun to rise again, even as the Fed implemented a significant 50-basis-point rate cut in September – a move that appears to have been a serious policy misstep, exacerbated by additional cuts in November and December,” Morrison added. The release of the Consumer Price Index and the central bank’s Beige Book on economic activity, scheduled for Wednesday, could offer insight into the central bank’s policy direction.
The risk-off sentiment impacted large-cap stocks, which have been at the forefront of the U.S. stock rally in recent years. Tesla saw a 2.9% decline, Amazon.com was down by 0.9%, and Alphabet registered a 0.6% decrease in premarket trading. Chip stocks like Nvidia witnessed a 3.1% drop, Advanced Micro Devices fell by 1.7%, and Broadcom lost 2.5% after the U.S. government
