Market Turmoil: Stocks Plummet as Jobs Report Exceeds Expectations
The US stock market took a nosedive on Friday as investors digested the final jobs report of 2024, which blew past expectations on hiring and raised uncertainty about the path of interest rates this year. The Dow Jones Industrial Average plummeted 1.6%, or nearly 700 points, while the S&P 500 fell 1.5%. The tech-heavy Nasdaq Composite tumbled 1.6%, erasing all year-to-date gains.
A Healthy Labor Market, But at What Cost?
The December nonfarm payrolls report showed a very healthy labor market, with the US economy adding over 250,000 jobs in the month, while the unemployment rate fell to 4.1%. While this is good news, it also raises concerns that the strong reading could prompt the Federal Reserve to keep interest rates higher for longer. The 10-year Treasury yield continued its recent uptick, moving closer to 4.8% and touching its highest levels since late 2023.
Inflation Expectations on the Rise
Fresh data also showed that consumers are more pessimistic about future pricing pressures. According to a new reading from the University of Michigan’s consumer sentiment index, year-ahead inflation expectations rose from 2.8% last month to 3.3% this month, the highest since May 2024. Long-run inflation expectations also ticked up from 3% in December to 3.3% in January.
Fed Rate Cuts Now Less Likely
Amid the strong jobs report and rising inflation expectations, markets are now pricing in no easing before July, according to the CME FedWatch Tool. Fed Chair Jerome Powell and other officials have made it clear they’re slowing down on lowering rates, and the latest data has pushed back expectations of a rate cut.
Earnings Season Kicks Off
Despite the market turmoil, investors welcomed a clutch of upbeat earnings to start the year. Walgreens posted a first-quarter profit beat, a sign the healthcare company’s turnaround efforts are paying off. Shares rose over 20%. Delta stock jumped more than 9% after a record year for travel fueled a fourth-quarter profit beat and record annual revenue.
What’s Next?
Next week, investors will get a fresh check on inflation with CPI data, which could further solidify the Fed’s position on interest rates. The big banks are also set to post quarterly results, offering insights into credit conditions and spending heading into the new year.
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