U. S. stocks plunged on Friday after a December jobs report withdrew investors’ hopes for more interest rate cuts from the Federal Reserve this year.
The Dow Jones plunged 697 points, while the Nasdaq 100 and S&P 500 declined more than 1%.
The economy added 256,000 jobs in December, well above the estimate of the average economist to 155,000. The 4. 1% unemployment rate opposed 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 a single drop in the Fed’s 25-basin interest rate this year, according to the CME FedWatch tool, but economists say that even this projection is too rosy.
“Given a resilient labor market, we now think the Fed cutting cycle is over. Inflation is stuck above target and risks are skewed to the upside. Economic activity is robust. We see little reason for additional easing,” economists at Bank of America said in a Friday note.
On Friday, Wharton professor Jeremy Siegel subsidized this view in an interview with CNBC.
“I think the market would possibly say that there is no rate drop in 2025, and that 10 years can also break very well above 5%,” Siegel said.
Siegel highlighted that higher bond yields have historically pulled down stock market valuations, so it would be no surprise for the stock market to experience a correction this year.
Here’s where US indexes stood at the 4:00 p.m. closing bell on Friday:
Here is what others have today:
In commodities, bonds, and crypto: