By Johann M Cherian and Sukriti Gupta
(Reuters) – Wall Street’s main indexes fell on Friday, touching one-week lows after an upbeat jobs report fueled fresh inflation worries and boosted bets that the Federal Reserve will take a cautious approach to cutting interest rates this year.
Along with a daily decline of about 1.9%, the domestic small-cap index was on course to fall into a correction, after falling about 10% from a record high reached in late November.
At 10:01 a.m., it fell 555.96 points, or 1.31%, to 42,074.56, the S&P 500 lost 90.46 points, or 1.55%, to 5,826.73, and it lost 390.73 points, or 2.02%, to 19,085.99.
A Labor Department report showed that job growth unexpectedly accelerated in December while the unemployment rate fell to 4.1% as the labor market ended the year on solid footing.
Traders now see the central bank cutting borrowing costs for the first time in June, then holding steady for the rest of the year, according to CME Group’s (NASDAQ: ) FedWatch tool.
Pressuring stocks, the yield on the 30-year Treasury note jumped more than 5% – the most since November 2023, while Wall Street’s fear gauge hit its highest level in more than two weeks.
Eight of the S&P 500’s 11 sectors were down, led by a 1.8% decline in technology stocks, while the financial sector and currency-sensitive real estate also lost 1% each.
“It’s good news. It’s very positive for the economy, but markets are concerned that a strong economy will cause inflation,” said Thomas Martin, senior portfolio manager at Globalt Investments.
Adding to the gloomy mood, a University of Michigan survey found that consumer sentiment fell to 73.2 in January from the previous month.
Wall Street’s major indexes are poised to close their second straight week in the red, with the benchmark S&P 500 down nearly 4% from a record high of a month ago.
New inflation worries have taken center stage, forcing the Fed to issue a cautious outlook on monetary easing last month as it anticipates policy changes on trade and immigration under President-elect Donald Trump, who is due to take office in 10 days.
Multiple reports of his plans, including one to impose a state of emergency on the national economy to speed up the implementation of tariffs, have left investors wondering about their potential impact on the economy and global trade.
Voting members of the Federal Open Market Committee have expressed the need for a measured approach to lowering borrowing costs this year, the latest being according to the report Chairman St. Louis Feda Alberto Musalem.
Chip stocks such as Nvidia (NASDAQ: ) fell 3.2%, pressured by a report that the US could announce new export regulations as early as Friday.
Delta Air Lines (NYSE: ) rose 10.6% after forecasting better-than-expected annual adjusted profit. Earnings reports will be in full swing next week.
Insurers such as Mercury General (NYSE: ) fell 21.3% and Travelers (NYSE: ) fell 2.3% on expectations of heavy industry losses from the Los Angeles wildfires.
Declining issues outnumbered advancing issues by a ratio of 4.39 to 1 on the NYSE and by a ratio of 3.74 to 1 on the Nasdaq.
The S&P 500 index hit five new 52-week highs and 22 new lows, while the Nasdaq Composite hit 20 new highs and 119 new lows.
