US stocks plummeted on Friday as investors digested a better-than-expected jobs report that soured expectations of future rate cuts from the Federal Reserve. The Dow Jones Industrial Average dropped by 697 points, closing at 41,938, while the S&P 500 fell by 1.5% and the tech-heavy Nasdaq index fell by 1.6%.
The jobs report showed an economy adding 256,000 jobs in December, far outpacing expectations of around 153,000 jobs. While strong job growth signals a healthy economy, it raises concerns about how soon the central bank needs to cut interest rates again.
Traders now expect just a 2.7% chance the Fed will cut rates at its policy meeting later this month, according to the CME FedWatch Tool. This is a significant decrease from Thursday’s expectations of a 41% chance.
The yield on the 10-year US treasury spiked to 4.76%, and the yield on the 30-year US treasury rose to 4.95%. Rising yields signal concern about a stronger-than-expected economy, resurgent inflation, and potentially fewer rate cuts in 2025 than anticipated.
Several stocks fell on Friday, including Nvidia, Apple, and Palantir. Analysts at Goldman Sachs now expect just two rate cuts from the Fed this year, citing job growth that exceeded expectations.
The Fed’s rate-cutting path is becoming increasingly murky, with some analysts expecting a pause in rate cuts until at least May. Others believe the central bank may need to consider raising rates due to resurgent inflation and concerns about the impact of “higher for longer” interest rates.
“The big question is to what extent is the Fed thinking about immigration and tariff policy that is yet to be implemented,” said Ross Mayfield, an investment strategist at Baird.
Source: https://edition.cnn.com/2025/01/10/investing/us-markets-jobs-report/index.html