Market's Early Momentum Fades as Stock Indexes End Mixed

Wednesday’s stock market told a story of initial optimism that couldn’t sustain itself. While the Nasdaq 100 managed to post its strongest showing in 3.5 weeks, the broader market retreated as the day progressed. The S&P 500 Index slipped -0.34%, the Dow Jones Industrials dropped -0.94%, though the Nasdaq 100 inched forward +0.06%. March futures showed similar pressure, with E-mini S&P futures declining -0.36% while E-mini Nasdaq futures advanced a modest +0.03%.

Economic Data Shifts Market Sentiment Lower

The day’s turning point came from employment data that painted a softer labor market picture. December’s ADP employment report revealed private employers added just 41,000 jobs—well below the 50,000 forecast. November’s JOLTS report similarly disappointed, showing job openings fell to 7.146 million, a 14-month low and below expectations of 7.648 million. These signs of economic weakness triggered a dovish pivot, sending the 10-year Treasury yield down -3.7 basis points to 4.136%.

This lower-yield environment initially supported equities, but the weakness proved insufficient to overcome sector-specific headwinds that emerged during the session.

Chip Stocks Lead the Decline

The rally from the prior day in semiconductor and data storage names reversed sharply. Western Digital led the losers in the Nasdaq 100, sliding more than -8%, while Seagate Technology fell -5% and Marvell Technology dropped -4%. The selloff extended across the broader chip complex, with Texas Instruments down -3%, NXP Semiconductors, Advanced Micro Devices, and KLA Corp each declining more than -2%.

Defense stocks also faced pressure after policy headwinds. President Trump’s statements regarding restrictions on dividends and buybacks for defense contractors prompted sharp declines: Northrop Grumman fell -5%, Lockheed Martin dropped -4%, General Dynamics slid -3%, while RTX Corp and Huntington Ingalls Industries each lost -2%.

Selective Strength in Defensive Sectors

Not all sectors faded alongside the decline. Cybersecurity stocks advanced meaningfully, with Crowdstrike Holdings, Palo Alto Networks, and Zscaler each climbing more than +3%. Atlassian gained more than +2%.

Pharmaceutical and biotech sectors showed notable strength. A positive clinical trial announcement sent Monte Rosa Therapeutics surging more than +45%, while acquisition speculation lifted Ventyx Biosciences more than +37% on reports that Eli Lilly & Co. is pursuing the company at over $1 billion. Regeneron Pharmaceuticals advanced +4% following a Bank of America double-upgrade to buy, Bristol-Myers Squibb gained +4% after UBS upgraded to buy, and Amgen led Dow gainers with a +3% advance on UBS’s upgrade to buy with an $380 price target.

Earnings and Macro Calendar Ahead

The week ahead centers on labor market health and housing data. Thursday brings Q3 productivity figures expected at +5.0% and initial jobless claims forecast to rise by 13,000 to 212,000. Friday’s nonfarm payroll data—expected to show +70,000 job additions with unemployment holding at 4.5%—will be pivotal for interest rate expectations. The market currently prices just a 14% probability of a -25 basis point rate cut at the January 27-28 FOMC meeting.

Global Markets Navigate Mixed Signals

Overseas, the Euro Stoxx 50 declined -0.14% as Eurozone inflation data came in softer than feared. December core CPI rose +2.3% year-over-year, below the +2.4% expectation. China’s Shanghai Composite climbed to a 10.5-year peak, advancing +0.05%, while Japan’s Nikkei Stock 225 retreated -1.06%. European bond yields moved lower in sympathy with weaker data, with the 10-year German bund yield falling to a 1-month low at 2.792% and the UK 10-year gilt declining to 4.400%.

October factory orders also disappointed, falling -1.3% month-over-month versus expectations for a -1.2% decline, reinforcing themes of economic softness even as the ISM services index unexpectedly expanded to 54.4 in December—its strongest pace in fourteen months and a counter-signal suggesting service sector resilience remains intact.