Wall Street Slumps on Strong Jobs Data, Fed Rate Concerns/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ Wall Street futures fell sharply after stronger-than-expected December jobs data signaled the Federal Reserve may delay rate cuts in 2025. Treasury yields spiked, weighing on equities. Meanwhile, insurance stocks tumbled over wildfire concerns, while Delta and Constellation Energy rose on strong performance and acquisition news.
Wall Street Slump: Quick Looks
- Job Market Strength: U.S. added 256,000 jobs in December, exceeding forecasts of 153,000.
- Market Reaction: S&P 500 futures fell 0.8%, Dow Jones futures dropped 0.7%, Nasdaq futures slid 1%.
- Treasury Yields Surge: 10-year yield rose to 4.79%, the highest since September.
- Sector Movers: Delta and Constellation Energy rose, while insurance stocks fell on wildfire concerns.
- Global Markets: Asian and European markets showed mixed performance amid Fed rate and tariff worries.
Wall Street Slumps on Strong Jobs Data, Fed Rate Concerns
Deep Look
Wall Street took a hit Friday morning after the U.S. government reported stronger-than-expected job growth for December, raising concerns that the Federal Reserve might hold off on interest rate cuts in 2025. Futures for major indexes slid, Treasury yields surged, and insurance stocks took a beating as markets absorbed the implications of the robust labor market data.
Strong December Job Growth
The U.S. economy added 256,000 jobs in December, far surpassing economists’ expectations of 153,000. This strong performance indicates continued resilience in the labor market but could complicate the Federal Reserve’s plans to ease monetary policy.
The Fed recently scaled back its forecast for 2025 rate cuts, from four to two, as inflation continues to hover above its 2% target. Friday’s report reinforces the possibility that the central bank will remain cautious about loosening policy further.
Market Reactions
U.S. stock futures dropped following the jobs report:
Higher Treasury yields also added pressure to equities. The 10-year yield rose to 4.79%, up from 3.65% in September, while the 2-year yield climbed to 4.38% from 4.29%. Rising yields make borrowing more expensive for businesses and provide an attractive alternative to volatile stock markets, weighing on investor sentiment.
Sector Highlights
Several key sectors saw significant movements:
- Insurance Stocks: Wildfires in Los Angeles raised fears of increased payouts, dragging down shares of Allstate (-4.7%) and Travelers (-4%).
- Delta Air Lines: Shares soared 7.5% after the company exceeded Q4 profit and revenue expectations, driven by strong holiday demand.
- Constellation Energy: The power generation company’s stock surged 10.3% after announcing a $16.4 billion cash-and-stock deal to acquire Calpine.
Global Market Trends
Concerns over U.S. monetary policy and President-elect Donald Trump’s potential trade tariffs impacted global markets. Asian markets declined broadly:
- Nikkei (Japan): Down 1.1%
- Hang Seng (Hong Kong): Down 0.9%
- Shanghai Composite (China): Down 1.3%
In Europe, markets showed mixed performance, with Germany’s DAX flat, France’s CAC 40 slipping 0.1%, and the UK’s FTSE 100 edging 0.1% lower.
Commodities and Currency Movements
Oil prices rose sharply in early trading:
- U.S. Crude: Up $2.87 to $76.79 per barrel.
- Brent Crude: Up $2.83 to $79.75 per barrel.
Currency markets saw modest fluctuations:
- The U.S. dollar strengthened to 158.77 Japanese yen, up from 158.14 yen.
- The euro dipped slightly to $1.0233 from $1.0301.
Uncertain Outlook
As investors grapple with robust economic data and shifting Fed policy, caution remains. Concerns over Trump’s trade policies, particularly potential tariffs targeting China, add to market volatility. Analysts note that increased tariffs could ripple across regional economies, further unsettling global markets.
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