Market Turmoil: Stocks Plummet, Bond Yields Soar After Surprising Jobs Report
Economic Strength Spells Trouble for Rate Cuts
The US economy’s impressive job growth in December has sent shockwaves through the financial markets, with stocks tumbling and bond yields surging. The unexpected strength in the labor market has led investors to reassess their expectations for Federal Reserve rate cuts this year.
Fed’s Hawkish Stance Intensifies
The robust jobs report, which saw the unemployment rate fall to its lowest level in months, has reinforced concerns about stubborn inflation pressures. As a result, the Fed’s focus on combating inflation is likely to intensify, making rate cuts less likely in the near future.
Bond Yields Skyrocket
Treasury yields have been on the rise since the Fed began its rate-cutting cycle in September. The 10-year yield has now breached 4.77%, with some experts predicting it could reach 5% in the coming months. This surge in yields has significant implications for equity markets, which are already reeling from the news.
Equities Take a Hit
The S&P 500 has erased its 2025 gains, with the index set for its worst rout since December 18. Small caps are in “correction” territory, having plunged around 10% from their previous highs. The Dow Jones Industrial Average and Nasdaq 100 have also suffered significant losses.
Investors on Edge
The sudden shift in market sentiment has left investors scrambling to adjust their expectations. With the Fed’s hawkish stance intensifying, many are bracing themselves for more volatility in the coming weeks.
Experts Weigh In
Neil Birrell at Premier Miton Investors notes that the strong jobs report has dashed hopes for a quiet start to the year. “Good news for the economy is bad news for those hoping for interest-rate cuts,” he says. Gina Bolvin at Bolvin Wealth Management Group warns that investors should prepare for more turbulence as the market recalibrates its expectations.
Corporate Highlights
In other news, Tesla has refreshed its best-selling Model Y, while Hewlett Packard Enterprise has won a major deal to provide servers to Elon Musk’s X social network. Nvidia has criticized new chip export restrictions, and Delta Air Lines has reported a profit beat. Walgreens Boots Alliance has reported strong quarterly sales, and Constellation Energy has agreed to acquire Calpine Corp. in a $16.4 billion deal.
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