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U.S. equity futures moved higher in early Tuesday trading, while Treasury yields held steady following the biggest decline in five weeks, as investors looked to tidy positions and portfolios into the final trading day of a outstanding year for domestic stocks.
Stocks ended sharply lower on Monday, with the S&P 500 retreating 1.06% even as the bond market saw its biggest pullback in yields in more than a month, as investors booked end-of-year profits and braced for near-term uncertainty on rates, policy and economic performance under a new U.S. government.
The moves still left the benchmark, the broadest measure of bluechip shares, on pace for a 25.2% annual gain. That’s the best since performance since 2021, but it could be tough to replicate over the coming year.
“Positive surprises that drove stocks higher in the last year may be more difficult to come by in the year ahead. Inflation pressures are lingering, interest rates are rising, and geopolitical threats are significant,” said Jeffrey Buchbinder, chief equity strategist at LPL Financial.
Wall Street is looking to close out its strongest year since 2021 on a high note.
Tayfun Coskun/Anadolu Agency via Getty Images
Bond markets may prove to be a crucial component to next year’s stock performance as U.S. debt levels approach the $40 trillion mark and inflation pressures continue to hold north of the Federal Reserve’s 2% target.
Last night’s easing of yields, however, is likely to run through today’s session, with benchmark 10-year notes trading at 4.521% and 2-year notes at 4.241% heading into the start of the New York session.
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On Wall Street, stocks are set for a firmer open following last night’s selloff, with futures contracts tied to the S&P 500 suggesting a 22 point opening bell gain and those linked to the Dow Jones Industrial Average indicating a 156 point advance.
The tech-focused Nasdaq, which is up 29.8% for the year, is called 107 points higher with Tesla (TSLA) , Nvidia (NVDA) and MicroStrategy (MSTR) active in early trading.
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In Europe, the Stoxx 600 was last marked 0.27% lower in Frankfurt, with many markets closing at mid-day for New Year’s Eve celebrations. The regional benchmark is closing out its weakest quarter in two years and one pace for a meager full-year gain of 5.4%.
Britain’s FTSE 100, meanwhile, was last marked 0.52% higher in a half-day session in London, but is also up only 5.7% for the year.
Overnight in Asia, the Nikkei 225 was closed for its traditional New Year holiday while the region-wide MSCI ex-Japan benchmark fell 0.52%, trimming its full-year gain to around 8%.
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