Wall Street faltered on Tuesday as robust economic data dampened expectations for imminent rate cuts. The tech sector bore the brunt of the sell-off, with Nvidia plunging 6.2% despite unveiling new AI products. Other tech giants like Amazon, Tesla, Apple, and Microsoft also dragged down the market. As we enter 2025, the market had anticipated Fed rate cuts as early as March, but now July appears to be the earliest possibility according to current projections.
With inflation risks now a given, especially considering the upward trajectory of oil prices, the focus shifts to unemployment. The looming question is whether we’re heading towards higher unemployment rates, particularly in light of the significant layoffs announced by prominent figures such as Musk and Ramaswamy. This scenario would present a conundrum for the Fed and likely exert downward pressure on equities. The December jobless report, due on Friday, may provide initial insights into this developing situation.