NEW YORK (AP) — Good news on the U.S. economy may no longer be good for Wall Street, and the stock market is feeling pressure on Tuesday from better-than-expected reports on the job market and business activity.
The S&P 500 swung to a loss of 0.7% after losing an earlier, small gain. The Dow Jones Industrial Average was down 38 points, or 0.1%, as of 1:17 p.m. Eastern time, while the Nasdaq composite sank 1.2%.
Stocks stumbled under the weight of rising yields in the bond market, which jumped immediately after the release of the encouraging reports on the economy. One said U.S. employers were advertising more job openings at the end of November than economists expected. The other said activity for finance, retail and other services businesses grew much faster in December than expected.
The strong reports are of course good news for workers looking for jobs and for anyone worried about a possible recession. But such a solid economy could also make the Federal Reserve less likely to deliver the cuts to interest rates that Wall Street loves.
The Fed began cutting its main interest rate in September to give the economy a boost, but it’s hinted a slowdown in easing is coming. The threat of tariffs and other policies from President-elect Donald Trump has raised worries about possible upward pressure on inflation, which has stubbornly remained just above the Fed’s 2% target.
Tuesday’s report on U.S. services industries also contained discouraging trends on inflation, saying price increases accelerated in December.
Expectations for fewer cuts to rates in 2025 had already been building for weeks, which sent longer-term Treasury yields upward. Those higher yields make Treasury bonds more attractive to investors who might otherwise buy stocks, and the super-safe bonds are paying notably more.
The yield on a 10-year Treasury climbed further to 4.67% from 4.63% shortly before the release of Tuesday’s reports and from just 4.15% in early December.
High yields can put heavy pressure on stocks seen as the most expensive, which pulls the lens toward Nvidia and other Big Tech stocks that have soared in the frenzy around artificial-intelligence technology.
Nvidia had been on track to set another all-time high in morning trading, after CEO Jensen Huang unveiled a suite of new products and partnerships in a speech the night before. He talked up the potential for AI technology in robotics, among other opportunities for big growth.
But after Tuesday morning’s economic reports, Nvidia swung to a loss of 4.3% and became the heaviest weight on the S&P 500. Drops for Amazon, Tesla, Meta Platforms and Broadcom also dragged the index lower.
Now that worries from the summer about a potentially slowing U.S. economy have eased and the 10-year Treasury yield is firmly above 4.50%, “we believe the market is shifting into a ‘good news is bad news’ environment again,” according to Bank of America strategists led by Ohsung Kwon.
That raises the stakes for Friday’s coming update on the U.S. job market, which economists expect to show a slowdown in overall hiring. They’re looking for growth of 156,500 jobs in December, according to FactSet.
A “Goldilocks” reading for the U.S. stock market that would be strong enough but not too strong for the Fed would likely be in the 125,000 to 175,000 range, along with an unemployment rate of 4.2%, according to Bank of America.
Helping to keep the losses for U.S. stock indexes in check was Cintas, which rose 2.6% after making public its offer to buy its smaller rival, UniFirst, for $275 per share in cash.
Cintas said it first made that offer in November but has been unable to get UniFirst’s board to meet. UniFirst had rejected an earlier offer of $255 per share, said Cintas, which provides uniforms, restroom supplies, fire extinguishers and other products to businesses.
UniFirst jumped 20% to $203.41, below Cintas’ offer price.
Elsewhere on Wall Street, Shutterstock and Getty both climbed after they announced they were joining to become a $3.7 billion visual content company to provide customers with a broader array of still imagery, video, music, 3D and other media.
Getty Images shareholders will own a slight majority of the combined company. Getty shares jumped 22.6%, while Shutterstock climbed 19.7%.
In stock markets abroad, some notable Chinese companies fell after the U.S. Defense Department added dozens of them to a list of companies it says have ties to China’s military. The announcement caused some of the companies to protest and say they will seek to have the decision reversed.
Added to the list were gaming and technology company Tencent, artificial intelligence firm SenseTime and the world’s biggest battery maker CATL. Tencent’s stock that trades in Hong Kong fell 7.3%.
That helped pull the Hang Seng index down 1.2%, but indexes were stronger elsewhere in China and across much of Asia and Europe.
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AP Business Writers Yuri Kageyama and Matt Ott contributed.
