- US stocks fell on Friday after a strong December jobs report reduced hopes for Fed rate cuts in 2025.
- The economy added 256,000 jobs in December, surpassing expectations and lowering the unemployment rate to 4.1%.
- Higher bond yields may lead to a stock market correction.
US stocks plunged on Friday after a strong December jobs report dashed investor hopes of more interest rate cuts from the Federal Reserve this year.
The Dow Jones plunged 697 points, while the Nasdaq 100 and S&P 500 declined more than 1%.
The economy added 256,000 jobs in December, well above the average economist estimate of 155,000. The unemployment rate unexpectedly declined to 4.1% from 4.2% in November.
The strong jobs report sparked a surge in bond yields, with the 10-year US Treasury yield surging to its highest level since October 2023, hitting an intraday high of 4.79%.
Markets now expect just one 25-basis point interest rate cut from the Fed this year, according to the CME FedWatch Tool, but economists think even that projection is too rosy.
“Given a resilient labor market, we now think the Fed cutting cycle is over. Inflation is stuck above target and risks are skewed to the upside. Economic activity is robust. We see little reason for additional easing,” economists at Bank of America said in a Friday note.
Wharton professor Jeremy Siegel backed up that view in an interview with CNBC on Friday.
“I think really the market is saying maybe no rate cuts in 2025, and that the 10-year could very easily break well above 5%,” Siegel said.
Siegel highlighted that higher bond yields have historically pulled down stock market valuations, so it would be no surprise for the stock market to experience a correction this year.
Here’s where US indexes stood at the 4:00 p.m. closing bell on Friday:
- S&P 500: 5,827.04, down 1.5%
- Dow Jones Industrial Average: 41,938.45, down 1.6% (697 points)
- Nasdaq composite: 19,161.63, down 1.6%
Here’s what else happened today:
- Here are 5 black swan evens that could surprise the stock market this year.
- The LA fires have burned more than 10,000 structures and could become the state’s costliest wildfire ever.
- Surging yields in the bond market highlight investors’ changing view of the incoming Trump administration.
- We asked ChatGPT to predict the stock market in 2025. Here’s what it had to say.
- Legal experts say the Supreme Court could uphold the looming US ban on TikTok.
In commodities, bonds, and crypto:
- West Texas Intermediate crude oil surged 3.58% to $76.57 a barrel. Brent crude, the international benchmark, was higher by 3.60%, at $79.69 a barrel.
- Gold jumped 0.92% to $2,715.50 an ounce.
- The 10-year Treasury yield jumped 9 basis points to 4.778%.
- Bitcoin increased 2.77% to $95,112.
