The cryptocurrency market experienced a holiday hangover, with Bitcoin sliding after Christmas. Crypto ETFs, which didn’t trade during the holiday, caught up to the downward move on Thursday. Weakness in Bitcoin and Ethereum reverberated across digital-asset-linked equities, dragging down related sectors.

Economic data added to the mixed sentiment. Weekly jobless claims totaled 219,000, slightly below forecasts, while continuing claims rose to 1.91 million—the highest since November 2021. This points to a labor market that remains resilient but may be gradually softening.

While the data supports the case for potential rate cuts in 2025, the Federal Reserve’s scaled-back projections for next year’s cuts have tempered expectations. Investors now anticipate just two rate reductions, down from the four previously indicated.

The market outlook hinges on bond yields and economic data in the coming weeks. If Treasury yields continue rising, equities—particularly growth stocks—face the risk of further declines. However, the potential for a Santa Claus rally driven by seasonal factors could lend near-term support.

Traders should monitor labor data closely for signs of softening, as any deterioration could shift market expectations toward earlier Fed rate cuts. In the short term, yields above 4.6% on the 10-year Treasury remain a key headwind for risk assets.

More Information in our Economic Calendar.