The recent performance of major US stock indices made headlines on Tuesday, as they all closed lowerThis decline followed a string of optimistic economic reports suggesting that the American job market appears more robust, coupled with the potential for rising inflation, which significantly dampened expectations for interest rate cuts by the Federal Reserve.

According to the Bureau of Labor Statistics, the Job Openings report revealed a notable increase in vacancies in November, largely driven by substantial growth in the business services sectorSpecifically, the number of job openings surged from a revised October figure of 7.8 million to 8.1 million—surpassing all analysts' predictionsThis uptick is indicative of not just a recovering job market but also a demand for skilled labor, which may signal further economic growth.

Moreover, another report highlighted that activity in the service sector accelerated in December, reflecting an uptick in business operations; however, an index measuring input prices spiked to its highest level in nearly two years

This signals a rise in inflation, aligning with the Federal Reserve's predictions of only moderate rate cuts in the coming year.

Joe Mazzola, a trading and derivatives strategist at Charles Schwab, pointed out that the market may have prematurely believed that the fight against inflation was nearing its conclusionHe noted, "It now appears that this issue will last longer than anticipated, and interest rates will likely remain elevated." This sentiment was echoed as the benchmark 10-year Treasury yield reached a peak of 4.677%, marking an eight-month high, further suppressing the performance of risk assets.

In light of the economy's demonstrated resilience, market expectations for the first rate cut from the Federal Reserve this year have been pushed backTools provided by CME Group indicate that traders now see a higher likelihood of a cut occurring in June while maintaining rates unchanged for the rest of the year.

Atlanta Fed President Raphael Bostic also weighed in, emphasizing caution among officials when making decisions in light of inconsistent progress in taming inflation

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He advised a preference for sustaining higher rates until clearer trends emerge.

Investor sentiment took a hit amid concerns over potential tariffs that the US government may impose, which could exert upward pressure on consumer prices and further complicate the Federal Reserve's monetary policy decisionsThis uncertainty around fiscal policies and their impact on inflation looms large over the markets.

Dan Niles, founder of Niles Investment Management, offered a particularly cautious forecast, predicting a significant downturn for the stock marketHe stated that he considers cash the preferred investment choice for 2025, expressing concern that inflation could resurge by the end of that yearNiles suggested that robust consumer spending and growth-oriented fiscal policies might compel the Federal Reserve to raise interest rates, potentially leading to a 20% decline in the stock market.

Analyzing the market closely reveals that the Dow Jones Industrial Average fell by 178.20 points, a drop of 0.42%, closing at 42,528.36. The Nasdaq composite also suffered, decreasing by 375.30 points, or 1.89%, ending at 19,489.68, while the S&P 500 dropped 66.35 points, a decline of 1.11%, closing at 5,909.03.

Most industry exchange-traded funds (ETFs) followed suit in downturns, particularly with semiconductor ETFs down by 2.38% and global tech stock indices down by 2.21%. Likewise, technology, consumer discretionary, and internet stock ETFs saw declines ranging from 1.99% to 1.56%. Meanwhile, the global airline ETF managed to gain 0.74%, and biotechnology indices rose by 0.88%, thanks to strong performances in the energy sector which recorded an uptick of 1%.

The S&P 500 sector performance reflected overall negativity, with most sectors closing in the red

The consumer staples sector dropped by 0.27%, while the communication services sector fell by 1.05%. The financial sector posted a slight decline of 0.15%, whereas healthcare saw a modest increase of 0.58%, albeit technology faced significant pressure, dropping by 2.39%.

Looking at individual stock performances, the 'big seven' tech companies experienced widespread declines as well, with Nvidia plunging by 6.22%, Tesla down by 4%, and Amazon decreasing by 2.42%. Meta and Microsoft saw falls of 1.95% and 1.28%, respectively, while Alphabet's Class A shares fell by 0.7%.

In contrast to the overall downward trend, vaccine manufacturers saw significant gains, with Moderna shares surging nearly 12% and Novavax increasing by almost 11%. This jump followed news of the first reported human death due to avian influenza in the US, prompting renewed focus on vaccine development and public health priorities.

Johnson & Johnson made headlines by increasing 1.8%, bolstered by research indicating that its combination therapy for lung cancer surpassed the efficacy of AstraZeneca’s leading drug, Tagrisso

This breakthrough has the potential to redefine treatment paradigms for one of the deadliest cancer types.

In corporate news, a major announcement caught the eye of investors: Getty Images and Shutterstock—the two leading giants in visual content copyright—revealed a definitive merger agreement, resulting in a surge in stock prices for both companiesAccording to the announcement, the new entity will operate under the name "Getty Images Holdings" and continue trading on the NYSE under the ticker "GETY". Following the completion of the merger, existing shareholders of Getty Images will control 54.7% of the new company, while Shutterstock shareholders will hold 45.3%. Mark Getty will continue as chairman of the board, alongside CEO Craig Peters, defining a shared vision for the combined company.

In personnel news, JPMorgan Chase is shifting its policy regarding remote work, with plans to mandate all employees to return to the office five days a week, effectively ending hybrid work arrangements for thousands of staff