Stock Market Update

[BRIEFING.COM] Major equity indices registered significant declines today, driven by a surge in market rates following the release of this morning’s labor market data. The S&P 500 fell 1.5% and the Nasdaq Composite declined by 1.6%. The Dow Jones Industrial Average fell nearly 700 points, or 1.6%.

The Employment Situation report for December, released at 8:30 ET, showed nonfarm payrolls exceeding expectations with an increase of 256,000, while the unemployment rate edged lower to 4.1% from 4.2%, and the year-over-year growth in average hourly earnings was a solid 3.9%. The market’s negative sentiment following the report was largely attributed to concerns over persistent inflationary pressures, fueled by a robust labor market and earnings growth, alongside worries that the Federal Reserve may maintain higher interest rates for an extended period.

The 10-year Treasury yield, which was at 4.70% prior to the report, jumped to 4.78% in its aftermath before settling at 4.78%, up nine basis points from yesterday. The 2-year yield, which is most sensitive to changes in the fed funds rate, rose from 4.29% just before the report to 4.40%, an increase of 13 basis points from yesterday.

The broader market experienced widespread losses, with ten of the 11 S&P 500 sectors in the red. Market breadth reflects this downside skew, with decliners outpacing advancers by a 4-to-1 margin on the NYSE and by a 3-to-1 margin on the Nasdaq.

Some individual stocks outperformed, driven by specific catalysts. Delta Air Lines (DAL 66.95, +5.53, +9.0%) gained 9.7% following stronger-than-expected earnings results, while Walgreens Boots Alliance (WBA 11.76, +2.54, +27.6%) surged 27.6% after surpassing earnings estimates. Taiwan Semiconductor Manufacturing Company (TSM 208.37, +1.25, +0.6%) reported record revenues for the fourth quarter, leading to a 0.6% rise in its stock price.

Energy stocks were another bright spot, leading the S&P 500 energy sector to close 0.3% higher, driven by commodity prices. WTI crude oil futures rose 3.6% to $76.63/bbl and natural gas futures jumped 4.6% to $3.40/mmbtu.

• S&P Midcap 400: -0.7% YTD
• Nasdaq Composite: -0.8% YTD
• S&P 500: -0.9% YTD
• Russell 2000: -1.8% YTD
• Dow Jones Industrial Average: -1.4% YTD

Reviewing today's economic data:

• December Nonfarm Payrolls 256K (Briefing.com consensus 154K); Prior was revised to 212K from 227K,December Nonfarm Private Payrolls 223K (Briefing.com consensus 140K); Prior was revised to 182K from 194K,
• December Avg. Hourly Earnings 0.3% (Briefing.com consensus 0.3%); Prior 0.4%, December Unemployment Rate 4.1% (Briefing.com consensus 4.2%); Prior 4.2%, December Average Workweek 34.3 (Briefing.com consensus 34.3); Prior 34.3
  • The key takeaway from the report for the market is that it was perhaps too good, which makes it think one of two things, if not both: the Fed may have made a mistake cutting rates as aggressively as it did at the end of 2024, thereby fueling the prospect of sticky inflation because the labor market is still strong, and there isn't going to be another rate cut for an extended period.
• January Univ. of Michigan Consumer Sentiment - Prelim 73.2 (Briefing.com consensus 73.5); Prior 74.0
  • The key takeaway from the report is that consumers' worries about the future path of inflation increased, which is not what the Fed wants to hear, especially as plans to implement new tariffs loom on the near horizon.

Looking ahead, Monday's calendar features the December Treasury Budget at 2:00 p.m. ET.