US Equity Indexes Decline as Rising Treasury Yields Signal Divided Fed, Cautious Interest Rates Outlook

04:56 PM EST, 12/08/2025 (MT Newswires) -- US equity indexes fell on Monday, taking a breather near record highs, as gains in government bond yields signal potential unease with policy guidance expected from the Federal Reserve by mid-week.

The Dow Jones Industrial Average declined 0.5% to 47,739.32, with the S&P 500 down 0.4% to 6,846.51, and the Nasdaq Composite 0.1% lower at 23,545.90.

The likelihood that the Fed will adopt a dovish stance in December has been a major contributing factor in pushing benchmark equity indexes toward records, helping alleviate the scare with big tech.

The most important aspect of the Fed's communication on Wednesday will be whether Chair Jerome Powell characterizes policy as "in a good place", as he did for the first several months of 2025 when the central bank was on hold, or if he repeats his description of policy being "modestly restrictive" or "somewhat above neutral," Jefferies Chief US Economist Thomas Simons said in a note.

In the case of the latter, the door will remain open to further cuts in early 2026.

The current probability of the Fed announcing a 25-basis-point reduction is over 89%, up from more than 86% on Friday, according to the CME FedWatch tool. Ahead of the statement and the updated Summary of Economic Projections, the market expectation is for one to two cuts of the same magnitude by March.

Investors are concerned that the Fed could be cautious about the rate outlook, according to a report from The Wall Street Journal. This is partly because nonfarm payroll reports for October and November are due on Dec. 16, and the Consumer Price Index will also be updated on the same day, after the Fed policy decision, according to a Friday note from Scotiabank.

"Powell will have no justification to talk about future rate cuts as all the information becomes new," with delayed economic data still to come, the news report said, citing Andy Brenner of NatAlliance Securities.

US Treasury yields traded higher, with the two-year yield up 1.5 basis points to 3.58%. The 10-year yield advanced 2.9 basis points to 4.17%, the highest since mid-November.

Gold futures fell 0.5% to $4,222.31, and silver futures slumped 1% to $58.47.

Except for technology, all the other sectors retreated. Communication services, consumer discretionary, and materials led the decliners.

Paramount Skydance (PSKY) surged 9.9%, the top gainer on the S&P 500, after the company kicked off an all-cash tender offer to acquire Warner Bros. Discovery (WBD) for $30 a share. The bid values Warner Bros. at $108.4 billion and reflects an $18 billion cash premium compared with the Netflix (NFLX) offer terms, according to Paramount. Shares of Warner Bros. advanced 4.4%, among the leaders on the Nasdaq and the S&P 500.

President Donald Trump raised potential antitrust concerns around the Netflix (NFLX) deal on Sunday. Shares of Netflix (NFLX) dropped 3.4%, among the worst performers on the Nasdaq.

In energy markets, West Texas Intermediate crude oil futures sank 2.1% to $59.11 a barrel.

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