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US stocks fell on Friday after a strong December jobs report dampened hopes for a Fed rate cut in 2025.
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The economy added 256,000 jobs in December, beating expectations and reducing the unemployment rate to 4.1%.
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Higher bond yields can lead to a stock market correction.
US stocks fell on Friday after strong December jobs report dashed investors’ hopes that the Federal Reserve would cut interest rates further this year.
The Dow Jones fell 697 points, while Nasdaq 100 and S&P 500 fell more than 1%.
The the economy created 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 sent bond yields soaring, with the 10-year U.S. Treasury yield rising 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 the resilient labor market, we now think the Fed’s cutting cycle is over. Inflation is stuck above target and risks are to the upside. Economic activity is strong. We don’t see much reason for further easing,” Bank economists said. of America in a note dated Friday.
Wharton professor Jeremy Siegel backed that view in an interview with CNBC on Friday.
“I think really the market is saying there may not be a rate cut in 2025 and the 10-year could very well break well above 5%,” Siegel said.
Siegel pointed out that higher bond yields have historically dragged down stock market values, so it wouldn’t be a surprise if the stock market saw a correction this year.
Here’s where US indices stood at the closing bell on Friday at 16:00:
Here’s what else happened today:
In commodities, bonds and cryptocurrencies:
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West Texas Intermediate crude oil rose 3.58% to $76.57 a barrel. Brent crude oilthe international reference value, was higher by 3.60%, at 79.69 dollars per barrel.
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Gold jumped 0.92% to $2,715.50 an ounce.
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The 10-year bond yield jumped 9 basis points to 4.778%.
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Bitcoin up 2.77% to $95,112.
Read the original article at Business Insider
