Stocks Dip as Treasury Yields Rise, Nvidia Reverses from Record Highs

Stocks traded lower on Tuesday, giving up earlier gains as rising Treasury yields raised concerns about the Federal Reserve‘s potential rate cuts later this year. The Dow Jones Industrial Average fell 0.2%, while the S&P 500 slid 0.5%. The tech-heavy Nasdaq Composite dropped 0.5%, with Nvidia reversing from record highs despite unveiling new AI initiatives at CES 2025.

Nvidia CEO Jensen Huang announced Nvidia Cosmos, a computing platform for accelerating physical AI development, during his keynote at CES. However, Nvidia shares dipped more than 2% after reaching record highs in the previous session. Meanwhile, Tesla slipped nearly 3% after Bank of America downgraded the electric vehicle maker, citing its high valuation and strategic risks.

Investors are navigating a volatile market as the year progresses. Cameron Dawson, chief investment officer at NewEdge Wealth, noted, “That is our base case, this idea that you’re going into 2025 with such a higher bar that it sets up for some choppy price action when you consider the valuations that we’re starting the year with.”

The U.S. services sector grew faster than expected in December, with the ISM services sector PMI reaching 54.1, above the Dow Jones estimate of 53.4. The price index within the PMI surged 6.2 points to 64.4, signaling potential inflationary pressures. This has raised questions about the Fed’s ability to cut rates as much as Wall Street hopes.

In Asia, Japan’s Nikkei 225 led gains, rising 1.97%, driven by a tech rally among semiconductor-related stocks. However, Hong Kong’s Hang Seng Index fell 1.34%, dragged down by tech and health-care stocks. The U.S. Defense Department’s addition of Chinese tech giant Huawei to a list of “Chinese military companies” has also impacted market sentiment.

As the market digests these developments, investors are advised to brace for further volatility. The Dow Jones Industrial Average and S&P 500 remain in focus, with key stocks like Nvidia, Tesla, and Bank of America driving market movements.