Trump Policy Shock Triggers Pullback From Record Highs in U.S. Equities

Market Overview

U.S. equities retreated from record highs on Wednesday as markets digested mixed economic data and rising geopolitical risks. The S&P 500 and Dow Jones Industrial Average pulled back from all-time highs, while the Nasdaq Composite managed to extend its rally for a third consecutive session.

Markets also witnessed a historic milestone: Alphabet shares closed up 2.5%, with its market capitalization surpassing Apples for the first time since 2019. However, a series of policy remarks from former President Trump triggered sharp sector-specific volatility. Defense stocks sold off broadly after Trump signaled a potential ban on dividends and share buybacks for military contractors, sending Northrop Grumman down 5.5%. Meanwhile, Blackstone plunged 5.6% following reports that Trump plans to restrict institutional investors from purchasing U.S. single-family homes.

In contrast, refining stocks outperformed. Valero Energy rose more than 3% amid expectations that Venezuelan oil exports could be redirected to the United States.

On the macro front, weaker-than-expected ADP employment data initially pushed U.S. Treasury yields to session lows. The trend reversed later in the day after a stronger ISM Services PMI bolstered the U.S. dollar. The offshore renminbi weakened toward the 7.00 level, marking a year-to-date low.

Risk assets broadly came under pressure. Cryptocurrencies declined, with Bitcoin falling below USD 91,000 and Ethereum dropping more than 5%. Commodities cooled across the board. Precious metals saw sharp losses, led by silver and platinum. Silver futures plunged more than 6%, spot platinum fell nearly 8% at its intraday low, and gold declined over 1%. Industrial metals also retreated, with LME copper down more than 2% after pulling back from record highs, while LME nickel slid over 3%. Crude oil extended losses for a second straight session, falling to a three-week low, with WTI crude down more than 2% intraday.

Key Themes to Watch

ADP Employment Shows Modest Recovery

U.S. December ADP employment increased by 41,000, rebounding from Novembers decline but falling short of market expectations. November JOLTS job openings dropped to a more than one-year low and, for the first time in four years, fell below the number of unemployed workers, signaling continued cooling in hiring activity. Meanwhile, the December ISM Services PMI climbed to 54.4, indicating resilient demand and a modest rebound in service-sector hiring.

U.S. December ISM Services PMI Hits Over One-Year High

The ISM Services PMI rose 1.8 points to 54.4 in December, marking its highest level since October 2024. New orders posted their strongest increase since September 2024, reflecting improving demand conditions. Service-sector employment recorded its healthiest growth since February, while the pace of price increases slowed to a nine-month low.

Key Data to Watch (GMT+8)

20:30 (ET)

U.S. December Challenger Job Cuts (thousands)

21:30 (ET)

Initial Jobless Claims for the week ending January 3

U.S. October Trade Balance (USD billions)

23:00 (ET)

U.S. October Wholesale Sales MoM

Overnight

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New York Fed December 1-Year Inflation Expectations