Market Wrap | Inflation and Earnings Woes Push U.S. Stocks Lower Amid Global Rate Cuts

On December 12 (Thursday), U.S. stock markets experienced a collective decline. The S&P 500 fell by 0.54% to 6,051.25 points, the Dow Jones Industrial Average lost 0.53%, settling at 43,914.12 points, while the Nasdaq shed 0.66% to close at 19,902.84 points.

U.S. markets opened on Thursday with mixed performance following a weaker-than-expected earnings report from software giant Adobe, which saw its stock plummet by over 12%. Concurrently, the weekly jobless claims unexpectedly rose, and November's Producer Price Index (PPI) exceeded predictions, indicating inflationary pressures. Adding to the global monetary policy shifts, the European Central Bank executed its fourth interest rate cut for the year.

Economic indicators from Thursday showed the U.S. Department of Labor reporting a 3% year-on-year increase in November PPI, with a 0.4% rise from the previous month—both figures surpassing market expectations. Recent job data revealed an unexpected increase in first-time unemployment claims, reaching 242,000 for the week ending December 7, raising concerns about a cooling labor market.

These economic surprises have bolstered the anticipation for a rate cut by the Federal Reserve in its upcoming meeting, with traders almost certain of a 25-basis-point reduction. Factors such as seasonal labor market distortions due to holidays are suggested to account for some recent volatility in unemployment claims numbers, analysts said.

On the international front, the European Central Bank cut its rates by 25 basis points down to 3% and signaled weaker than expected growth for the eurozone. The Swiss National Bank also surprised the markets by reducing its key rate from 1% to 0.5%, aiming consecutively for the fourth decrease within the year to counteract declining economic momentum and pressures from potential trade tariffs announced by the incoming U.S. administration.

Among notable company updates, software provider Adobe faced a share price decline following lowered revenue expectations, while tech giant Tesla captured attention on the back of CEO Elon Musk surpassing a personal net worth milestone.

Market participants will turn their focus to upcoming earnings releases from major companies like Broadcom and Costco as they navigate the current economic uncertainties fueled by inflation trends and potential geopolitical developments post the change in U.S. presidential administration.