Stocks wrapped up the session pretty much where they started on Wednesday, as investors digested a stronger-than-expected jobs report that muddied the outlook for Federal Reserve rate cuts.
The Dow Jones Industrial Average slipped 67 points, or 0.1%, to close at 50,121. The S&P 500 was essentially flat at 6,941, while the Nasdaq Composite edged down 36 points, or 0.2%, to 23,066. The small-cap Russell 2000 underperformed, falling 11 points, or 0.4%, to 2,669.
The real story of the day was the labor market. A surprisingly strong jobs report threw a bit of cold water on the recent narrative that the economy is cooling enough to justify near-term rate cuts. Just weeks ago, softer December retail sales had boosted hopes that the Fed might soon pivot toward easing. Now, traders are recalibrating.
Markets are currently pricing in a growing chance that the Federal Reserve will keep rates steady in the coming months, with more than 40% of investors expecting policymakers to stand pat through June.
Attention is also turning to earnings season for clues about the health of the American consumer and corporate spending trends. McDonald’s is set to report after the bell, offering a read on global consumer demand, while Kraft Heinz said Tuesday it would pause its previously announced spin-off plans.
In tech, Cisco is due to report after the close as well, with investors watching closely as the networking giant rolls out a new AI-focused chip aimed at competing for a share of Big Tech spending.
Bitcoin is still out of favor, trading around $67,600 on Wednesday afternoon.
There still seems no appetite to go dip-buying in the asset class, which hit fresh multi-month lows last week," said Chris Beauchamp of IG.
"In a world filled with AI and where gold continues to shine, bitcoin’s appeal is firmly on the wane at present, and if this selloff is like the others, we could be in for a long period of declines before it finally hits a sustainable low.”
Bank of America analysts called today's jobs report "a feast for the hawks," or strongly supportive of the Federal Reserve’s current policy stance.
Payrolls surged well above expectations, wages and hours rose, and downward revisions were minimal, with strength broad-based across industries.
The unemployment rate fell to 4.3% for “good reasons,” including a 528,000 rise in household employment and higher prime-age participation. The broader U-6 underemployment rate also dropped to 8.0%, and long-term unemployment fell.
Analysts said the report reinforces the view that Fed Chair Jerome Powell is unlikely to cut rates this year, with markets now pricing minimal near-term easing. They noted that under a potential Christopher Warsh-led Fed, the path to cuts may narrow if the unemployment rate remains low.
Analysts described January’s US jobs report as broadly encouraging but noted ongoing challenges in the labor market. Wells Fargo economists said, “The labor market is far from perfect, with hiring still concentrated in a handful of industries and certain demographics enduring elevated unemployment. That said, it appears closer to stabilization than rapid deterioration, which will embolden the hawks on the Federal Reserve to maintain the current policy stance.”
Gina Bolvin of Bolvin Wealth Management highlighted slower growth last year, noting the addition of 130,000 jobs shows stabilization while downward revisions to 2025 reflect meaningful deceleration. LPL Financial’s Jeffrey Roach pointed to rising average workweeks, suggesting some sectors are boosting hours rather than headcount. XTB’s Kathleen Brooks noted the unusual revisions for 2025 but said the three-month payroll average is trending upward, signaling momentum into 2026.
The report initially lifted U.S. Treasury yields and has shifted expectations for Federal Reserve rate cuts, with analysts now projecting fewer cuts this year and the first potential reduction in July rather than June.
The US labor market showed signs of strength in January, with job creation doubling expectations, even as final revisions for 2025 cut 862,000 positions, averaging 72,000 fewer jobs per month. Unemployment fell to 4.3%, while average hourly earnings rose 3.7% year-over-year.
“Until we see significant weakness in the labor market, the economy or corporate profits, we believe this is still a market where dips can be bought,"" Chris Zaccarelli, Chief Investment Officer at Northlight Asset Management, said.
Zaccarelli added that the report could ease recent stock market jitters tied to concerns over a potential slowdown and may temper expectations for near-term interest rate cuts.
US stocks have opened higher but the gains of the main indexes have been trimmed already.
The S&P 500 and Nasdaq opened up over 0.7% higher but are now up just over 0.1%.
The Dow Jones initially climbed over 0.5% to hit a new high above 50,450 in initial trades, but is now up around 0.2%.
Leading the way, Nvidia has climbed 2.2%, with Caterpillar topping the Dow gains, up 4.4%. Salesforce is a weight, falling 3.3%.
Outside the blue-chips, Mattel tumbled 26% after the toymaker reported quarterly results that fell short of expectations, with the profit outlook affected by plans for strategic investments.
LYFT dropped 14% as the ride-hailing company met fourth-quarter forecasts but offered a softer profitability outlook, with analysts pointing to slowing ride growth and competitive pressures.
US stock futures have picked up after the delayed January jobs report came in stronger than expected.
For January, there were 130k new jobs added, well ahead of the consensus forecast of 55k.
The US unemployment rate fell to 4.3%, from 4.4%, where it had been expected to stay.
Average hourly earnings were up 0.4% to $37.17. Over a year the rise was 3.71%.
New payrolls for 2025 the average monthly change was revised down to +15k from +49k.