U.S. Stocks Fall as Investors Rotate Into Bonds Ahead of Key Inflation Data
U.S. stocks declined on Thursday as investors shifted capital from equities into bonds ahead of Friday’s closely watched consumer price index (CPI) report. The move pushed Treasury yields lower, while a sharp post-earnings drop in Cisco Systems (NASDAQ: CSCO) added pressure to the technology sector.
At 11:55 ET (16:55 GMT), the S&P 500 fell 1.1% to 6,863.58 points. The Dow Jones Industrial Average also lost 1.1% to 49,586.04, ending a three-day winning streak. The Nasdaq Composite underperformed, sliding 1.6% to 22,695.39.
Markets had delivered mixed results on Wednesday after a stronger-than-expected U.S. jobs report delayed expectations for the next Federal Reserve rate cut.
Strong Jobs Data Reduces Fed Rate Cut Expectations
Wednesday’s labor market report showed U.S. nonfarm payrolls increased by 130,000 in January, exceeding forecasts. The unemployment rate edged down to 4.3%, reinforcing the view that the U.S. economy remains resilient.
However, the robust employment data reduced the likelihood of near-term Federal Reserve interest rate cuts. Traders trimmed bets on policy easing, pushing bond yields lower as they repositioned ahead of inflation data.
The report also included downward revisions to prior months, suggesting some underlying weakness outside key sectors such as leisure, hospitality, healthcare, and government employment.
Additional data on Thursday showed initial jobless claims rose to 227,000, slightly above expectations. Continuing claims also exceeded forecasts at 1.862 million. Meanwhile, January existing home sales fell to 3.91 million, marking the lowest level since September 2024.
Treasury Yields Decline Before CPI Report
Investor demand for bonds increased ahead of Friday’s CPI release. The benchmark 10-year Treasury yield dropped 5 basis points to 4.121%, while the more rate-sensitive 2-year yield fell 4 basis points to 3.468%.
Markets are now pricing in a high probability that the Federal Reserve will keep interest rates unchanged in both March and April, according to CME FedWatch data.
Cisco Slumps After Earnings Miss
Earnings season remains active, with fourth-quarter 2025 results generally exceeding expectations. However, Cisco Systems weighed heavily on the Nasdaq after reporting quarterly gross margins below analyst estimates.
The networking giant has been affected by rising memory chip prices, driven by increased demand for data centers supporting artificial intelligence models. Higher input costs have pressured margins for companies reliant on semiconductor components.
In other corporate news, McDonald’s (NYSE: MCD) shares rose after the company reported stronger-than-expected global comparable sales and profit. Restaurant Brands International (NYSE: QSR) shares edged lower despite beating quarterly comparable sales estimates.
Arista Networks (NYSE: ANET) and Applied Materials (NASDAQ: AMAT) are scheduled to report earnings after the market close.
Gold, Oil and Dollar Move on Economic Signals
Gold and silver prices declined following the strong payrolls data, which dampened expectations for imminent rate cuts. However, safe-haven demand linked to U.S.-Iran tensions helped limit losses.
The U.S. dollar strengthened after the jobs report, adding further pressure to precious metals.
Oil prices also fell, with Brent crude dropping 2.8% to $67.46 per barrel and West Texas Intermediate declining 2.9% to $62.79. Ongoing geopolitical tensions between Washington and Tehran continue to raise concerns about potential supply disruptions.
Investors will now turn their attention to Friday’s inflation report for clearer signals on the direction of U.S. monetary policy.
