Stock Market on Friday: Jobs Report Hurts S&P 500

US stock markets came under pressure on Friday, with the S&P 500 erasing all of its gains since the start of 2025. The main reason was fresh jobs data that beat expectations and reignited inflation fears. This has bolstered investor confidence that the Federal Reserve will not rush to cut interest rates this year.

Second straight weekly loss

Wall Street's key indexes ended the second straight week in the red.

"The year is off to a false start," said Sam Stovall, chief market strategist at CFRA Research. He said stronger-than-expected employment data is making things tougher for stocks. "It could get pretty tough for stocks," he added.

Key Indexes Fall

The Dow Jones Industrial Average lost 696.75 points, or 1.63%, to end the day at 41,938.45. The S&P 500 fell 91.21 points, or 1.54%, to 5,827.04. The Nasdaq Composite also showed negative dynamics, falling by 317.25 points (1.63%) to stop at 19,161.63.

Indices under pressure

The Russell 2000 index, which focuses on smaller-cap stocks, suffered especially noticeably. It fell by 2.27%, entering the correction zone after falling by 10.4% from the maximum recorded on November 25.

In addition, the so-called "fear index" of Wall Street (VIX) reached its highest value in the last three weeks, which indicates growing tensions among investors.

The US stock market started the year with a bright test: stronger employment data exacerbated inflation expectations and increased the likelihood that the Fed will continue its tight monetary policy. Investors seemed to be hoping for something else, but the reality turned out to be much less optimistic.

The labor market surprised: what does the growth in employment mean for the economy?

In December, the US labor market showed unexpected growth: the number of new jobs increased significantly, and the unemployment rate fell to 4.1%. Such an optimistic result ended the year on a high note and became a signal that the economy remains resilient even against the backdrop of tight monetary policy.

What is the threat of accelerating employment growth?

Higher rates of job growth can accelerate economic development, but it also increases the risk of rising inflation. In such a situation, the Federal Reserve System (FRS) may need to adhere to a conservative approach, limiting the pace of interest rate cuts. For markets, this means one thing: dreams of cheaper borrowing in the near future may not come true.

Forecasts of traders and analysts

According to the FedWatch tool from CME Group, investors expect the Fed to cut rates for the first time in June. However, after that, according to most analysts, rates will remain unchanged until the end of the year.

Some banks have revised their forecasts. For example, BofA Global Research admits that the Fed may go for another rate hike. This opinion contrasts with the position of the President of the Federal Reserve Bank of Chicago Austin Goolsbee, who believes that the US economy is not yet showing signs of overheating. He stressed that rate cuts are still likely and even advisable.

Bond yields hit records

Additional pressure on stock markets was exerted by the yield on 30-year Treasury bonds. On Friday, it reached 5%, the highest level since November 2023, but later corrected slightly, falling to 4.966%. Rising bond yields traditionally increase investor interest in these instruments, which draws funds from the stock market.

Energy is the only "winner" of the day

Most sectors of the S&P 500 showed negative dynamics. The exception was the energy index, which rose by 0.34%. This is due to rising oil prices and expectations of higher demand in the coming months.

Looking Ahead: What Will the New Economic Report Bring?

Investors are eagerly awaiting the release of the new Consumer Price Index on January 15. This figure will be an important benchmark for assessing the Fed's further actions. If the data comes out higher than expected, it could trigger even more pressure on stock markets and increase volatility.

Tech Sector Under Pressure: Nvidia and Other Chipmakers Shares Fall

Shares of the largest microchip makers, such as Nvidia, were under significant pressure. The company's stock price fell by about 3% amid reports that the United States could introduce new restrictions on technology exports as early as Friday. Such measures could hit the tech giants' earnings and increase tensions in the market.

A Billion-Dollar Deal: Constellation Energy Strengthens Its Positions

Amid the overall market decline, Constellation Energy stood out, its shares soaring by an impressive 25.16%. The rally followed the announcement of the company's intention to acquire privately held gas and geothermal company Calpine Corp for $16.4 billion. The deal should strengthen the company's position in the renewable energy sector and diversify its assets.

At the same time, another player with a similar name, Constellation Brands, faced difficulties: the company's shares fell by 17.09%. The reason is a reduction in annual sales and profit forecasts, which caused disappointment among investors.

Walgreens shows unexpected success

A pleasant surprise for the market was the growth of Walgreens Boots Alliance shares. The company showed positive results for the quarter, which caused a jump in its shares by 27.55%. This growth was one of the highlights of the session.

Balance of power in the market: the bears are superior

Despite some successes, the overall picture on the market was far from optimistic. On the New York Stock Exchange, the number of shares falling on the day outnumbered those advancing by a ratio of 4.24 to 1. On the Nasdaq, the ratio was 3.32 to 1.

Highs and Lows: The Day's Stats

Amid the volatility, the S&P 500 posted only six new 52-week highs, while the lows reached 32. The tech-heavy Nasdaq Composite saw an even more dramatic contrast, with 39 new highs versus 211 new lows.

Trading Volume at Record Levels

The session was marked by high activity, with total trading volume on U.S. exchanges amounting to 16.24 billion shares. This is well above the average of 12.31 billion over the past 20 trading days. Such a surge in activity suggests that the market is in a state of heightened uncertainty and tension.

Asian stocks under pressure: dollar, oil in focus

Major Asian stocks fell on Monday, while the dollar strengthened to a 14-month high. That came after an unexpectedly strong US payrolls report sent bond yields higher and cast doubt on lofty stock valuations. Markets have come under pressure as the corporate earnings season tightens.

Inflation data: A defining moment for Fed policy

Markets are anxiously awaiting the release of the US consumer price index (CPI) on Wednesday. A better-than-expected 0.2% rise in the core measure could close the door entirely on monetary easing. That prospect is adding to investor tensions, as any sign of accelerating inflation could force the Federal Reserve to stick to its tighter stance.

Oil market on the rise

Adding to the pain for Asian markets is rising oil prices, which have hit four-month highs on signs of supply cuts from Russia, where the US has stepped up sanctions pressure. The energy sector is back in focus, adding to uncertainty in global markets.

China: Export growth and new challenges

Despite global challenges, China's economic indicators have shown positive dynamics. The country's exports gained momentum in December, while imports showed a recovery. However, the world's second-largest economy is bracing for new trade challenges as it deals with the new US administration. This could impact global supply chains and overall demand.

Federal Reserve: New wave of comments

Five Fed officials are expected to speak this week to comment on unexpectedly strong labor market data. Particular attention will be focused on New York Fed President John Williams, who will speak on Wednesday. His words could set the tone for the regulator's future actions.

Bond yields hit new highs

The sharp rise in rates pushed the yield on the benchmark 10-year U.S. Treasury note to a 14-month high of 4.79%. In Asia, bonds were trading at 4.764%. Higher yields make bonds more attractive to investors, adding to pressure on stocks, real estate and commodities.

Global markets under pressure: Futures and stocks fall

Global stock markets faced a fresh round of uncertainty at the start of the week. Futures on the S&P 500 and Nasdaq fell 0.4% and 0.5%, respectively, extending Friday's pullback. European indices were also under pressure, with EUROSTOXX 50 and FTSE futures down 0.2% each, while Germany's DAX was virtually unchanged.

A quiet session in Asia

A holiday in Japan made trading in Asia sluggish. MSCI's broadest index of Asia-Pacific shares excluding Japan was down 0.4%. Japan's Nikkei was closed, but futures fell to 38,430 from a close of 39,190, signaling a likely correction at the open.

South Korea awaits policy decisions

South Korea's KOSPI (.KS11) slipped 0.5% as political tensions linger. The Constitutional Court is set to begin hearings on Tuesday to decide the fate of impeached President Yun Seok-yeol. The uncertainty is weighing on investor sentiment.

Chinese markets and unexpected export gains

Chinese blue chips (.CSI300) lost 0.2% despite positive economic data. The country's exports rose 10.7% in December, well above expectations, while imports rose 1%. The results, however, have sparked mixed reactions, with the US trade surplus hitting a record $105 billion, which could fuel calls for tougher tariffs on Chinese goods.

Global markets remain under pressure

The overall mood in markets remains cautious. Lower US and European futures, weakness in Asian indices and political instability in South Korea are setting a negative tone for the start of the trading week. Investors are eagerly awaiting further data and events to determine the direction of the coming days.

China steps up efforts to stabilize yuan

Amid pressure on the national currency, the People's Bank of China has taken steps to protect the weakening yuan. The central bank has relaxed offshore borrowing rules, giving companies more room to raise capital outside the country. In addition, the regulator has stepped up verbal interventions aimed at bolstering confidence in the currency.

Key economic data from China on the way

Investors are eagerly awaiting the release of key economic indicators from China on Friday, including data on gross domestic product (GDP), retail sales and industrial production. These figures will be important benchmarks for assessing the health of the world's second-largest economy.

Dollar Strengthens, Euro Loses Strength

The steady rise in US Treasury yields continues to support the dollar, which has strengthened against most major currencies. The euro, meanwhile, has fallen for an eighth week in a row, hitting $1.0230, its lowest since November 2022.

UK Tightens Fiscal Rules

UK Finance Minister Rachel Reeves said the government would take the necessary steps to ensure fiscal discipline is maintained. These actions are intended to maintain economic stability and prevent investors from deteriorating confidence in British financial policymakers.

Gold Remains Steady Despite Dollar Strength

The gold market remains surprisingly resilient amid a rising dollar and bond yields. The precious metal prices stabilized at $2,688 per ounce, demonstrating gold's strong appeal as a safe haven asset.

Oil Market: Prices on the Rise

Oil prices continue to rise on supply fears. Russian seaborne crude exports hit their lowest since August 2023, adding to pressure on global markets, especially amid tightening US sanctions.

Brent crude rose $1.19 to $80.94 per barrel;

American WTI rose $1.27 to settle at $77.84 per barrel.

Amid rising bond yields, currency fluctuations, and a tense situation in commodity markets, investors continue to monitor global economic trends. Key data from China and oil supply dynamics remain in focus, forming the basis for further market decisions.