Zinger Key Points
- U.S. economy adds 256,000 jobs in December, beating forecasts of 160,000 and marking the strongest growth since March 2024.
- Treasury yields surge across the curve, with 30-year yields breaching 5% for the first time since October 2023, spooking markets.
The December jobs report jolted financial markets during early Friday trading. Stronger-than-expected employment growth and a drop in the unemployment rate to 4.1% raised fears the Federal Reserve may hold off on cutting interest rates for most of 2025.
December Jobs Report Fuels Fed Hawkishness: Dollar Soars, Yields Jump
The U.S. economy added 256,000 new jobs last month, marking an acceleration from the downwardly revised 212,000 jobs added in November and sharply outpacing economist forecasts of 160,000, as tracked by TradingEconomics.
The December reading represented the strongest monthly job growth since March 2024, underscoring the continued resilience of the U.S. economy despite high interest rates and resurgent inflationary pressures.
The unemployment rate ticked down from 4.2%to 4.1% in November, defying expectations of no change. Wages rose broadly in line with expectations, with average hourly earnings increasing 0.3% month-over-month, slowing slightly from November’s 0.4%. On a year-over-year basis, wages climbed 3.9%, marginally below the 4% forecast.
Fed fund futures showed a steep decline in the probability of a March rate cut, with implied odds dropping to just 26%, down from 43% a day earlier, according to CME‘s FedWatch tool.
Treasury yields rose sharply across the curve, reflecting a repricing of interest rate expectations.
The two-year yield, closely tied to Federal Reserve policy expectations, jumped 11 basis points to 4.37%. The 10-year yield surged 10 basis points to 4.79%, its highest level since November 2023.
Notably, the most striking move came in the 30-year yield, which breached the 5% mark for the first time since October 2023. Before that, the last time 30-year yields surpassed this milestone was in August 2007. The iShares 20+ Year Treasury Bond ETF TLT dropped 1.2% in premarket trading, highlighting the market's sensitivity to long-term rates.
The U.S. Dollar Index, tracked by the Invesco DB USD Index Bullish Fund ETF UUP, surged 0.5% to 109.70, a level last seen in late October 2022.
The greenback climbed 0.4% against the Japanese yen and 0.6% versus the euro, pushing the euro-dollar pair to a fresh 27-month low of 1.0250. The Sterling wasn’t spared, falling 0.7% to a 15-month low against the dollar.
Stocks Slump Across The Board
Futures on major U.S. indices were down 1% across the board, as the prospect of higher-for-longer interest rates rattled investors. All S&P 500 sectors, except energy, traded in the negative premarket Friday.
Real estate, tracked by the Real Estate Select Sector SPDR Fund XLRE, and technology, represented by the Technology Select Sector SPDR Fund XLK, both sank 1.4%.
Rate-sensitive sectors such as real estate and growth-heavy tech bore the brunt of the selloff as higher yields weighed on long-duration assets.
The one standout sector was energy, with the Energy Select Sector SPDR Fund XLE climbing 1.3%.
Major Premarket Movers
Among energy giants, Chevron Corp. CVX gained 1.67% to $152.81, Exxon Mobil Corp. XOM rose 1.57% to $108.61 and ConocoPhillips COP advanced 1.43% to $103.07, benefiting from a 3% spike in oil prices after Reuters reported thet U.S. is mulling stronger sanctions on Russia’s oil sector.
In contrast, rate-sensitive mega-cap tech stocks dragged the market lower.
Nvidia Corp. NVDA fell 2.51% to $136.59, Advanced Micro Devices Inc. AMD dropped 2.92% to $118.28 and American International Group Inc. AIG plunged 3.93% to $68.63, leading losses among financials.
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