Stock futures fell sharply after labor market data for December came in much hotter than expected, adding to investor concerns that the Federal Reserve won’t cut interest rates again.
Futures tied to the Dow Jones Industrial Average were down 0.9% in recent trading, while those linked to the S&P 500 and Nasdaq fell 1% and 1.2%, respectively. The major indexes are poised to post losses for the week amid the uncertainty about where rates are headed.
This morning’s nonfarm payrolls report from the Bureau of Labor Statistics showed that U.S. employers added 256,000 jobs last month, well above the 155,000 that economists had estimated. The unemployment rate fell to 4.1%, below than 4.2% rate that was expected.
Today’s report provides the latest evidence of the continued strength of the U.S. labor market and the broader economy. While the economic resilience is good news, it also sparks worries that the Fed won’t be in a position to cut rates again as inflationary pressures persist. The central bank has trimmed its benchmark rate in each of its last three policy meetings—the first cuts in four years—but has warned that the pace of easing will likely slow this year.
The yield on the 10-year Treasury, which is correlated with rate expectations, jumped to 4.78% after the data, up from 4.68% yesterday and trading at its highest level in more than a year.
Shares of mega-cap technology companies were down across the board in premarket trading, led by a near-3% decline for AI chipmaker Nvidia (NVDA). Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOGL), Meta Platforms (META) and Tesla (TSLA) also lost ground.
Among other stocks on the move, insurers Allstate (ALL), Travelers (TRV), and Chubb (CB) were down sharply as estimates of damage related to the Los Angeles wildfires continue to rise.
Constellation Energy (CEG) jumped 13% following news that it will acquire Calpine for $26 billion. Delta Air Lines (DAL) and Walgreens Boots Alliance (WBA) were up 8% and 15%, respectively, after reporting better-than-expected quarterly results.
Oil stocks were gaining ground ahead of the bell as crude oil futures jumped more than 3%. ExxonMobil (XOM) and Chevron (CVX) each gained 1.5%, while shares of Occidental Petroleum (OXY) added 2%.
Bitcoin was trading at $93,500, up from an overnight low of $91,600 but well below the highs for the week on Monday of around $103,000.
Gold futures were up slightly and trading above $2,700 an ounce for the first time in nearly a month.