Stock Market Drops: Jobs Data Dash Rate Cut Hopes

US stocks took a nosedive on Friday after a surprisingly strong jobs report for December. The Dow plummeted by 697 points, closing at 41, 938, while the S&P 500 and Nasdaq indices fell by 1. 5% and 1. 6%, respectively. All three indices ended the week in the red. The economy added 256, 000 jobs last month, far exceeding expectations of around 153, 000 jobs. Strong job growth signals a robust economy but raises questions about future rate cuts by the Federal Reserve. As a result, traders now see a slim 2. 7% chance of a rate cut at the upcoming policy meeting. Smaller companies, tracked by the Russell 2000 index, also felt the heat, falling by 2. 2%. Investors are worried about the impact of higher interest rates for longer. President-elect Donald Trump's proposed tariff policies, including reports of a national economic emergency to impose widespread tariffs, added to investor fears, pushing bond yields higher.

The yield on the 10-year US Treasury hit 4. 76%, and the 30-year yield rose to 4. 95%. These rising yields suggest concerns about a stronger-than-expected economy, resurgent inflation, and potential delays in rate cuts. Analysts at Goldman Sachs now expect just two rate cuts this year, in June and December, instead of the previously anticipated three cuts. Bank of America economists even suggest that rate hikes could be on the table. Fed Chair Jerome Powell hinted at this possibility in December, though he indicated rate hikes were unlikely in 2025. However, Morgan Stanley analysts still predict a rate cut in March. The market is now likely to see a pause in rate cuts until at least May. “The big question is how the Fed will factor in immigration and tariff policies that are yet to be implemented, ” said Ross Mayfield, an investment strategist at Baird. Stocks like Nvidia, Apple, and Palantir contributed to the market's downward spiral, with Nvidia falling by 3%, Apple by 2. 4%, and Palantir by 1. 4%. ```

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