The stock market experienced a significant decline on Friday, as major indices recorded substantial losses following a mixed session on Wednesday.
Presently, while the indices have recovered somewhat from their lowest points, they remain in negative territory. The Dow Jones Industrial Average has fallen by 638.94 points, a reduction of 1.5%, bringing it to 41,996.26. Meanwhile, the Nasdaq Composite Index has decreased by 370.35 points, or 1.9%, landing at 19,108.53, and the S&P 500 Index has dropped by 91.35 points, or 1.5%, to 5,826.90.
The downturn in the stock market comes in response to the U.S. Labor Department's highly anticipated monthly employment report. This report revealed unexpectedly robust job growth for December, intensifying concerns over future interest rate adjustments.
According to the Labor Department, non-farm payroll employment increased by 256,000 jobs in December following a revised rise of 212,000 jobs in November. Economists had projected an increase of 160,000 jobs, contrasting with the previously reported gain of 227,000 jobs for November. Additionally, the unemployment rate slightly declined to 4.1% in December from 4.2% in November, contrary to economists' expectations of no change.
The report underscores the continued vigor in the labor market, likely affirming the Federal Reserve’s strategy to cautiously lower interest rates throughout the upcoming year. Bill Adams, Chief Economist at Comerica Bank, remarked, "The Fed had already eased off its restrictive stance somewhat in late 2024, as employment conditions softened. However, December's robust jobs report indicates no necessity to fully retract their caution."
Adams further commented, "The Fed remains wary that factors such as additional fiscal stimulus, increased tariffs, and immigration limitations could further propel economic growth, elevate inflation, and tighten labor conditions, thereby reinforcing a cautious approach toward further rate cuts."
In terms of market sectors, financial stocks are among the poorest performers today. The NYSE Arca Broker/Dealer Index and the KBW Bank Index have crashed by 3.0% and 2.7% respectively. Semiconductor stocks are also under considerable pressure, evidenced by a 2.6% fall in the Philadelphia Semiconductor Index. Weakness is similarly observed in telecom, software, and commercial real estate stocks, while airline stocks appear to be defying the overall market trend.
Looking internationally, stock markets in the Asia-Pacific region generally trended lower on Friday. Japan's Nikkei 225 Index dropped 1.1%, and China's Shanghai Composite Index fell by 1.3%. European markets also saw declines; the German DAX Index decreased by 0.4%, while both the U.K.'s FTSE 100 Index and France's CAC 40 Index reduced by 0.8%.
In the bond markets, U.S. Treasuries have noticeably fallen in reaction to the employment report. Consequently, the yield on the benchmark ten-year Treasury note increased by 7 basis points, reaching 4.751%.