Treasury Yields Rise as Strong U.S. Jobs Report Lifts Stocks
U.S. Treasury yields moved higher and major stock indexes traded modestly up on Wednesday afternoon after fresh data showed the U.S. economy added significantly more jobs than expected in January. The stronger labor market could make it harder for the Federal Reserve to continue cutting interest rates this year.
January Nonfarm Payrolls Beat Forecasts
According to the Labor Department, 130,000 jobs were added to nonfarm payrolls in January, far exceeding expectations of 70,000. However, payroll figures for November and December were slightly revised lower.
The unemployment rate fell to 4.3%, down from 4.4% in December and below analyst forecasts.
Eric Merlis, co-head of global markets at Citizens in Boston, described the report as a “blockbuster,” noting that a lower unemployment rate without significant wage acceleration supports the case for the Fed to keep rates steady at its March meeting.
Fed Rate Cut Expectations Decline
Before the jobs data release, markets had priced in roughly a 20% probability of a 25-basis-point rate cut at the Federal Reserve’s March meeting. Following the report, those expectations dropped sharply to around 6%, according to CME’s FedWatch Tool.
Stock Market and Global Reaction
On Wall Street, market movements were mixed:
- The Dow Jones Industrial Average slipped 0.04% to 50,169.46
- The S&P 500 rose 0.18% to 6,955.04
- The Nasdaq Composite gained 0.10% to 23,124.33
Energy stocks advanced alongside higher oil prices.
In Europe, markets were influenced by concerns over artificial intelligence disruption, which weighed on asset management shares. Despite this, the STOXX 600 index reached a record high, closing up 0.1%. Globally, MSCI’s world stock index rose 0.29%.
Currency and Bond Market Moves
The U.S. dollar index slipped 0.12% to 96.80 after initially rising on the jobs report. The euro edged down 0.1% to $1.1882.
Against the Japanese yen, the dollar weakened 1.02% to 152.79, as the yen extended its recent rally following Japan’s national election outcome.
Meanwhile, the Australian dollar climbed 0.88% to $0.7136, hitting a three-year high after Reserve Bank of Australia Deputy Governor Andrew Hauser reaffirmed the central bank’s commitment to tackling inflation.
The yield on the benchmark U.S. 10-year Treasury note increased 2.7 basis points to 4.172%.
Commodities Update
Oil prices moved higher, with U.S. crude settling at $64.63 per barrel. Brent crude also gained.
Spot gold rose 1.32% to $5,089.35 per ounce, reflecting continued investor interest in safe-haven assets.
Overall, the stronger-than-expected U.S. jobs report reinforced confidence in the labor market but reduced expectations for near-term Federal Reserve rate cuts.
