US stocks showed a mixed performance on Wednesday as investors reacted to a report that President-elect Donald Trump is contemplating declaring a national economic emergency to support his proposed tariffs. At the same time, minutes from the Federal Reserve’s December meeting revealed that “many” officials favored a gradual pace of interest rate cuts in 2025, adding to market uncertainty.
The S&P 500 (^GSPC) finished slightly higher, gaining just over 0.1%, while the Dow Jones Industrial Average (^DJI) rose by 0.25%, or about 100 points. The Nasdaq Composite (^IXIC), however, ended the day just below the flat line, reflecting investor caution amid mixed economic signals.
The 10-year Treasury yield (^TNX) remained steady at 4.7%, with markets awaiting the release of the December jobs report scheduled for Friday morning. The report is expected to provide further clues on the health of the labor market and the broader economy.
The potential declaration of a national economic emergency by Trump would provide a legal foundation for imposing sweeping tariffs. This news comes as Trump prepares to take office, triggering concerns over a series of policy changes and executive orders that could significantly affect the economy. Investors are particularly focused on how these developments may influence expectations for interest rate adjustments.
On Tuesday, stocks took a hit and the benchmark Treasury yield surged following a report showing stronger-than-expected readings in the service sector and labor market, reigniting worries about persistent inflation. The data reinforced signals from Federal Reserve officials that they may adopt a slower pace of rate cuts than previously anticipated. Market expectations now show a less than 50% chance of any interest rate easing before May, based on the CME FedWatch tool.
Analysts warn that robust economic data could prompt markets to reassess their outlook, potentially viewing it as a catalyst for prolonged high interest rates, or “higher for longer” monetary policy.
As investors weigh these mixed economic signals, all eyes remain on the upcoming jobs report and further developments surrounding the incoming administration’s policy agenda.
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