- US equities remained cautious as US yields slipped, with major indices closing the day in the red.
- The dovish Fed and lower yields failed to impress equity investors.
- Market participants await key US NFP and PMI data to recalibrate positions.
US equities remained cautious as the Treasury yields eased, reflecting softer rate expectations ahead of the final key releases of 2025. The bond movement carried a strong message, framing how investors positioned risk. The S&P 500 futures closed the day with a nominal loss of 0.16%, while the Nasdaq Composite slipped 0.59%.
The 10-year yields slipped 4.18%, while the 30-year yields decreased to 4.85%. Meanwhile, the 2-year yields eased to 3.51%, which matters most for equities. Investors anticipate continued Fed easing if the US labor data weakens further.
Equity markets interpreted the falling yields as supportive but failed to impress buyers as the decline stemmed from defensive positioning ahead of labor and inflation data. These data could define the Fed’s 2026 rate cut expectations.
Rate-sensitive sectors, such as tech and consumer discretionary, found modest support from lower rates. However, high-multiple growth stocks failed to attract inflows, revealing investors’ cautiousness without explicit confirmation of an easing cycle.
On the other hand, financial stocks lagged as lower yields reduced the odds of net interest margins. Meanwhile, cyclical sectors also struggled as falling yields highlighted demand for safety rather than confidence in future demand.
Liquidity conditions were added to the restraint. With year-end approaching, trading volume thinned, intensifying sensitivity to bond market moves. So, equities tend to follow rates rather than fundamentals, which explains why modest yield shifts carried outsized influence on sentiment.
Looking ahead, equities remain tied to incoming US data. Employment figures will be the primary driver, as confirmation of a cooling labor market would reinforce expectations for rate cuts and support equity valuations through lower yields. Conversely, resilient jobs data could reverse the bond rally and place renewed pressure on stocks, particularly in rate-sensitive sectors.
For now, US equities are holding ground rather than advancing. Falling yields provide a cushion, but they also reflect caution. Until data clarifies whether the economy is slowing gently or losing traction, equity markets are likely to stay range-bound and reactive rather than directional.
