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US stocks fell on Friday after a strong December jobs report dampened hopes for Fed rate cuts in 2025.
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The economy added 256,000 jobs in December, beating expectations and lowering the unemployment rate to 4.1%.
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Higher bond yields can lead to a correction in the stock market.
US stocks then plunged on Friday strong jobs report in December dashing investors' hopes of more interest rate cuts from the Federal Reserve this year.
The Dow Jones plunged 697 points, while the Nasdaq 100 a S&P 500 decreased by more than 1%.
The The economy added 256,000 jobs in December, well above the average economist estimate of 155,000. The unemployment rate unexpectedly fell 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 CME's FedWatch Tool, but economists think even that projection is too rosy.
“Given a resilient labor market, we now think the Fed cut cycle is over. Inflation is stuck above target and risks are skewing sideways. Economic activity is robust. We see little reason to ease additional,” economists at Bank of America said in a note Friday.
Wharton professor Jeremy Siegel echoed that view in an interview with CNBC on Friday.
“I actually think the market is saying there may not be any rate cuts in 2025, and the 10-year could very easily break well above 5%,” Siegel said.
Siegel pointed out that historically higher bond yields have lowered stock market valuations, so it would not be surprising for the stock market to experience a correction this year.
Here's where the US indices stood at the closing bell at 4:00 pm on Friday:
Here's what else happened today:
In commodities, bonds, and crypto:
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West Texas Intermediate Crude oil rose 3.58% to $76.57 a barrel. Brent crudethe international benchmark, higher by 3.60%, at $79.69 per barrel.
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Gold it jumped 0.92% to $2,715.50 an ounce.
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The 10-year Treasury yield jumped 9 basis points to 4.778%.
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Bitcoin increased 2.77% to $95,112.
Read the original article on Business Insider