A tip tray at a coffee shop in Brooklyn, New York, USA, on Friday, August 23, 2024.
Yuki Iwamura | Bloomberg | Getty Images
This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open informs investors about everything they need to know, no matter where they are. Like what you see? You can subscribe here.
What you need to know today
Inflation fears pull back US markets
US stocks fell and Government bond yields rose on Tuesday as the ISM services index shows a big jump in prices for December. European regional Stoxx 600 index added 0.32%. Shares of Volvo car closed more than 9% higher after the Swedish automaker reported a new global sales record for 2024.
Meta is ending its fact-checking program
Target on Tuesday announced it will eliminate its third-party fact-checking program to “bring back free expression” and move to a “Community Note” model, similar to Elon Musk’s Platform X system. Employees went to their internal forum and he criticized the company’s decisionmade two weeks before the inauguration of US President-elect Donald Trump.
The UK’s long-term borrowing costs are rising
Yields on long-term UK government bonds or gilts rose to their highest levels since the late 1990s after a tepid debt auction fueled concerns about demand. Susannah Streeter, head of money and markets at Hargreaves Lansdown, said there were growing concerns that the UK could be facing stagflation – a scenario where inflation remains high or rises while economic growth slows.
Anthropic’s potential valuation of $60 billion
Anthropic, an artificial intelligence startup founded by former OpenAI research executives, is in the late stages of conversation to raise as much as $2 billion at a $60 billion valuation, CNBC confirmed. The funding round is being led by Lightspeed Venture Partners, according to a person familiar with the matter. Anthropic, which has a lot of support Amazonthe creator of the AI chatbot is Claude.
[PRO] Warning signs in the stock market
Howard Marks, co-founder and co-chairman of Oaktree Capital Management who famously predicted the dot-com bubble, sees five warning signs on the stock exchange. While Marks isn’t calling it a bubble, he is concerned about signs of rising stocks. Here’s what investors should pay attention to, according to Marks.
Conclusion
In a sign of how worried investors are right now about the return of inflation, Institute for Supply Management Services Indexthe inflation reading, which is usually secondary to more significant data such as the consumer price index, causes shocks in the market.
The price index for the December ISM report jumped to 64.4% from 58.2% in November, an increase of more than 10%. It’s the first time since January 2024 the reading is above 60%, noted Steve Miller, chairman of ISM’s business research committee.
It could just be the beginning of an undesirable upward trend. Miller attributes part of the expansion in service activity to “risk management for the effects of port strikes and potential tariffs” — both of which create inflationary pressures.
In response, investors pushed 10-year Treasury yield to 4.699% during the US trading day, the highest level since April 26. They also cut their expectations for a 25 basis point rate cut at the US Federal Reserve meeting in January, estimating a 4.8% chance of that happening, down from an 8.6% chance just a day ago, according to CME Group’s FedWatch tools.
Stocks suffered. The S&P 500 fell 1.11 percent Dow Jones Industrial Average fell 0.42% and Nasdaq Composite slipped 1.89%, dragged down by falling tech stocks. Nvidia fell 6.2%, ending its three-day winning streak.
“You’re getting a recalibration of inflation expectations and Fed rate expectations. That’s triggered this small selloff in equity markets after earlier enthusiasm,” said Tom Hainlin, senior investment strategist at US Bank Asset Management Group.
But the strong ISM report also suggests the U.S. economy is still doing well, providing fertile ground for profit growth, Hainlin said. And as David Lefkowitz, CIO head of U.S. equities for UBS, wrote in a note on Monday, “profit growth is more important” than estimating returns over the next 12 months.
A single data point from a single measure of inflation does not indicate the trajectory of inflation or corporate health for the coming year. But for now, it pays to be cautious and cautious.
— CNBC’s Jeff Cox, Sean Conlon, Pia Singh and Lisa Kailai Han contributed to this report.
