A tip jar is seen at a café in Brooklyn, New York, US, on Friday, August 23, 2024.
Yuki Iwamura | Bloomberg | Getty Images
This report is from today's CNBC Daily Open, the international markets newsletter. CNBC Daily Open keeps investors informed on 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 are dragging US markets lower
US stocks fell and Treasury yields rose on Tuesday as the ISM Services Index showed a big jump in prices for December. Regional Europe Stokes 600 The index rose by 0.32%. Volvo Cars shares closed more than 9% higher after the Swedish automaker announced a new global sales record for 2024.
Meta is ending its fact-checking program
dead It announced on Tuesday that it would scrap its third-party fact-checking program in order to “restore freedom of expression” and move to a “community feedback” model, similar to the system on Elon Musk’s platform X. Employees took to their internal forum and criticized the company’s policy. The decision was made two weeks before the inauguration of US President-elect Donald Trump.
Long-term borrowing costs in the UK rise
Yields on long-term British government bonds, or government bonds, rose to their highest levels since the late 1990s after a tepid debt auction raised concerns about demand. Susannah Streeter, head of money and markets at Hargreaves Lansdowne, said concerns were growing that the UK could face stagflation – a scenario in which inflation remains high or rises while economic growth slows.
Anthropic's potential valuation is $60 billion
Anthropic, an AI startup founded by former OpenAI executives, is in late-stage talks to raise up to $2 billion at a $60 billion valuation, CNBC has confirmed. Lightspeed Venture Partners is leading the funding round, according to a person familiar with the matter. Anthropic, which has been strongly supported by Amazonis the creator of the chatbot Claude.
(PRO) Warning signs in the stock market
Howard Marks, co-founder and co-president of Oaktree Capital Management, who predicted the dot-com bubble, sees five warning signs in the stock market. While Marks does not call it a bubble, he is concerned about signs of froth in stocks. Here's what investors should pay attention to, according to Marks.
Bottom line
In a sign of just how worried investors are now about the return of inflation, the Institute for Supply Management's Services Index, usually a secondary inflation reading to more important data points like the Consumer Price Index, is sending shockwaves through the market.
The December ISM report's price index jumped to 64.4% from 58.2% in November, representing an increase of more than 10%. Steve Miller, chair of the ISM Business Survey Committee, noted that this is the first time since January 2024 that the reading has exceeded 60%.
This may be just the beginning of an unwelcome upward trend. Miller attributes some of the expansion in services activity to “risk management of the effects of potential port strikes and tariffs” – both of which generate inflationary pressures.
In response, investors pushed higher 10-year Treasury bond yield To 4.699% during the American trading day, the highest level since April 26. They also lowered their expectations for a rate cut by 25 basis points at the US Federal Reserve's January meeting, pricing in a 4.8% chance of that happening, down from a previous forecast. 8.6% probability just one day ago, according to CME Group's FedWatch tool.
Stocks suffered. the Standard & Poor's 500 It decreased by 1.11% Dow Jones Industrial Average It decreased by 0.42% Nasdaq Composite The index fell 1.89%, affected by the decline in technology stocks. Nvidia It fell 6.2%, breaking its three-day winning streak.
“You're getting a recalibration of inflation expectations and Fed rate expectations,” said Tom Heinlein, chief investment strategist at U.S. Bank's Asset Management Group. “That has sparked a small sell-off in equity markets after previous enthusiasm.”
The strong ISM report also indicates that the U.S. economy remains in good shape, providing fertile ground for earnings growth, Heinlein said. As David Lefkowitz, head of U.S. equities IT at UBS, wrote in a note on Monday, “earnings growth matters more” than assessing returns over the next 12 months.
A single data point from a single measure of inflation does not determine the path of inflation or the health of businesses for the coming year. But it pays to be careful to tread carefully at the moment.
— CNBC's Jeff Cox, Sean Conlon, Piya Singh and Lisa Kailay Hahn contributed to this report.
