The S&P 500 dropped 1.6% on Friday after a stronger-than-expected December jobs report stoked fears of an extended Federal Reserve pause on rate cuts, pushing Treasury yields higher. The Dow Jones fell 707 points (1.7%), while the NASDAQ declined 1.6%.
Jobs Report Surprises:
Nonfarm payrolls rose by 256,000 in December, surpassing forecasts of 164,000, with unemployment falling to 4.1%. Analysts believe the Fed is likely to keep rates steady in upcoming meetings, with rate cuts now anticipated by mid-2024.
Treasury Yields Spike:
The 10-year Treasury yield surged to 4.765%, nearing the 5% mark, pressuring growth sectors, particularly tech. Chipmakers NVIDIA and AMD slid, with the latter downgraded by Goldman Sachs due to revenue concerns.
Earnings Season Begins:
Major banks, including JPMorgan Chase and Citigroup, are set to report Q4 results next week. Meanwhile, Delta Air Lines shares soared 9% after surpassing earnings expectations, while Walgreens Boots Alliance gained 27% following strong quarterly results and an upbeat forecast.
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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