US Stocks Decline Amid Economic Slowdown and Inflation Pressures

US stocks experienced a slight decline on Tuesday as investors assessed a range of recent economic data showing a slowdown in economic activity, without fundamentally altering market expectations for the trajectory of the Federal Reserve's monetary policy.

The S&P 500 and Nasdaq indices fell by about 0.2% each, while the Dow Jones Industrial Average dropped by approximately 150 points, amid ongoing market bets for the possibility of at least one more rate cut next year.

Job and Spending Data Under Review

Non-farm payroll data showed that the US economy added 64,000 jobs in November, exceeding expectations, although the unemployment rate rose to 4.6%, the highest level since 2021, reinforcing signs of a slowing labor market. Meanwhile, retail sales remained stable month-on-month, affected by a decline in spending at car dealerships and gas stations, despite more resilient spending in other sectors.

Slowdown in Services and Private Sector

On the economic activity front, the preliminary reading of the Services Purchasing Managers' Index (PMI) showed a decline to 52.9 points in December, the weakest level in six months, with the slowest growth in new business recorded in nearly 20 months and employment growth in the sector nearing a halt.

The composite PMI for the private sector also dropped to 53 points, marking the lowest level in six months, with a slowdown in activity in both the services and industrial sectors, and a slight decline in corporate confidence regarding future expectations.

Inflation Pressures Despite Growth Slowdown

Despite the slowdown in activity, data showed rising inflation pressures, with input costs increasing at the fastest rate in over three years. Additionally, prices charged by firms surged to their highest levels since 2022, driven by rising labor costs and the impact of tariffs, according to company estimates.

Sector and Stock Performance

The energy sector was the weakest performer in the market, impacted by falling oil prices. Major company stocks showed mixed performance, with shares of Nvidia, Microsoft, Apple, Alphabet, and Tesla declining, while Amazon and Meta posted limited gains. Shares of Broadcom and Oracle saw positive rebounds after previous losses.