U.S. markets are poised for another decline as Treasury yields continue their upward trajectory and investors brace for a significant week of economic data and earnings reports. The S&P 500 has
experienced losses for two consecutive weeks, dropping 0.93% since the year began, following December’s stronger-than-anticipated employment report and uncertainties surrounding President-elect Trump’s incoming administration.
The yield on benchmark 10-year Treasury bonds reached 4.801% during overnight trading, marking its highest level since November 2023, while 2-year notes have climbed 17 basis points this year to 4.424%. This surge in yields is creating headwinds for equity markets by altering valuation metrics and providing investors with an attractive risk-free alternative.
LPL Financial’s chief technical analyst Adam Turnquist notes that stocks are struggling to find momentum in 2025’s early days, citing inflation pressures and diminished expectations for Federal Reserve rate cuts as key factors pushing yields to concerning levels. He suggests that technical indicators point to potential further yield increases and warns that a more substantial market pullback could be forthcoming as market breadth and momentum deteriorate.
This week’s calendar features crucial economic data releases, including December’s inflation and retail sales figures, alongside the unofficial launch of fourth-quarter earnings season. Approximately 20 S&P 500 companies will report their results, with major financial institutions like JPMorgan Chase, Goldman Sachs, Bank of America, and healthcare giant UnitedHealth Group among them.
Market indicators suggest a challenging start to the trading session, with S&P 500 futures indicating a 47-point decline at the opening bell. Dow Jones Industrial Average futures project a 150-point drop, while the Nasdaq, currently down 0.77% for the month, is expected to open 245 points lower.
Notable market movements include Nvidia, which is facing a 3% premarket decline to $131.82, potentially pushing the market’s second-largest stock into correction territory. The VIX volatility index has surged 20.37% to $21.74 in after-hours trading, reaching its highest level in nearly a month and suggesting expected daily S&P 500 fluctuations of around 1.36% or 79 points over the next 30 days.
Global markets are reflecting Wall Street’s Friday decline, with Europe’s Stoxx 600 falling 0.77% in Frankfurt, while London’s FTSE 100 has shown more resilience, dropping just 0.22% amid higher oil prices. Asian markets also struggled, with Tokyo’s Nikkei 225 closing down 1.05% and the regional MSCI ex-Japan index declining 1.81% in late trading.
Economists anticipate modest increases in both core and headline inflation readings for December, while holiday shopping and travel are expected to push retail sales near $730 billion. These upcoming economic indicators, combined with the start of earnings season and persistent yield pressures, are setting the stage for what could be a volatile week in financial markets.
The market’s current trajectory suggests investors are reassessing their positions amid changing economic conditions and monetary policy expectations, with particular attention focused on how corporate earnings and inflation data might influence Federal Reserve policy decisions in the coming months.