Investing.com– The S&P 500 fell sharply Friday, after a stronger-than-expected jobs report for December stoked fears of a prolonged Federal Reserve pause on rate cuts, sending Treasury yields sharply higher.
At 4:00 p.m. ET (21:00 GMT), Dow Jones Industrial Average fell 707 points, or 1.7%, S&P 500 dropped 1.6%, and NASDAQ Composite fell 1.6%.
Nonfarm payrolls surprises to upside, stoking fears of prolonged fed pause
The US economy unexpectedly added more jobs in December versus the prior month, according to a monthly report that could factor into how the Federal Reserve approaches possible interest rate cuts.
Nonfarm payrolls increased by 256,000 jobs last month after rising by an downwardly revised 212,000 in November, the Labor Department’s Bureau of Labor Statistics said. Economists had forecast an uptick of 164,000 roles.
The unemployment rate fell to 4.1%, below November’s pace of 4.2%.
“If Fed officials were pushed to commit to a rate decision for the January and March meetings today, they would almost certainly be looking at keeping rates steady, Jefferies said in a Friday note.
Following the jobs report, the odds that the Fed keeps rates unchanged at its meeting later in January jumped to 98%, with the next cut now expected in June or July, according to Investing.com’s Fed Rate Monitor Tool.
Spike in Treasury yields blunt tech
Cooling bets on Fed rate cuts, pushed the yield on the 10-year Treasury to its highest level since November 2023, weighing on growth sectors of the market including tech.
The 10-year Treasury yield climbed 8 bps to 4.765%, nearing the 5% level, which some warned could mark another blow to stocks.
“If 10-year Treasury yields decisively breach 5% (the prior peak), then growth fears would soon resurface and trigger an equity de-rating,” MRB Partners said in a recent note.
Elsewhere, tech was hurt by a slump in chip stocks as NVIDIA Corporation (NASDAQ:NVDA) and Advanced Micro Devices Inc (NASDAQ:AMD) led the sector to downside, with latter coming under pressure after Goldman Sachs downgraded AMD to neutral from buy, citing revenue growth worries.
Q4 earnings season kicks off next week
The fourth-quarter earnings season is set to begin in earnest next week, with several major banks, including JPMorgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC), Goldman Sachs (NYSE:GS) and Citigroup (NYSE:C) set to report on Wednesday.
Elsewhere, Delta Air Lines (NYSE:DAL) stock soared over 9% after the carrier reported fourth-quarter earnings that surpassed analyst estimates, driven by strong travel demand.
Walgreens Boots Alliance (NASDAQ:WBA) stock rose 27% after the pharmacy retailer reported first-quarter earnings and revenue above analyst expectations, and delivered an upbeat annual forecast.
(Peter Nurse, Ambar Warrick contributed to this article.)