Stocks declined on Tuesday as the post-election rally slowed. The Dow Jones Industrial Average fell by 382 points (0.86%), closing below 44,000 after its recent milestone, while the S&P 500 and Nasdaq saw more modest drops of 0.29% and 0.09%, respectively, breaking a five-day winning streak. Small-cap stocks, represented by the Russell 2000, slipped 1.8%, reflecting waning momentum for key sectors that had surged on optimism surrounding tax and regulatory relief under a second Trump administration.

A combination of profit-taking and investor caution led to declines in Tesla (-6.1%) and Trump Media & Technology Group (-9%), with analysts attributing the pullback to economic concerns like high deficits and anticipated inflation data. Treasury yields rose, with the 10-year yield climbing 12 basis points to 4.43%, and the dollar reached a two-year high. Market participants are now eyeing upcoming CPI and PPI data, expected to clarify inflation trends and guide expectations for Federal Reserve policy.

According to Citigroup strategists, the recent upward momentum could stall, with possible consolidation or corrections heading into Q1 of the new year. Survey data from 22V Research suggests a mixed market reaction to inflation readings, with a majority of investors predicting minimal impact. However, some warn that financial conditions may need tightening if inflation fails to ease. Richmond Fed President Thomas Barkin indicated that the economy’s strength has allowed for rate cuts, with markets pricing in about a 55% chance of another quarter-point rate cut in December.