Wall Street stocks slumped and the dollar climbed on Friday as a robust US jobs report dimmed hopes of further interest rate cuts.
Oil prices, meanwhile, briefly jumped past $80 per barrel on new US sanctions on Russia, further disrupting its crude exports and therefore tightening supplies.
The world’s biggest economy added 256,000 jobs last month, up from a revised 212,000 in November, said the Labor Department.
The figure smashed market expectations of between 150,000 and 160,000 jobs.
Traders say a strong US economy, as evidenced by the jobs data, means there is less likelihood of further Federal Reserve rate cuts — which have caused bond yields and the dollar to climb and stocks to move lower.
“Sentiment has soured on equity markets and the bond market strop out is showing signs of intensifying,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
Briefing.com analyst Patrick O’Hare said: “The key takeaway from the report for the market is that it was perhaps too good.”
The Fed indicated last month that it would cut rates just twice this year — down from the four previously flagged — due to sticky inflation.
That came amid concerns that incoming president Donald Trump’s plans to slash taxes, regulations and immigration — and to impose harsh tariffs on imports — would reignite price increases.
O’Hare said the strong jobs report suggests “the Fed may have made a mistake cutting rates as aggressively as it did at the end of 2024”.
Hargreaves Lansdown’s Streeter said: “Hopes for multiple rate cuts from the Fed… have fizzled out.”
Market expectations of the next rate cut have shifted to later in the year.
“The market may not love this jobs number but there are a lot worse things than a strong labour market,” said US investment analyst Bret Kenwell at eToro trading platform.
A strong jobs market is needed to keep consumers spending, which is the motor of the US economy, he noted.
“Investors need to keep that in mind — even if that means rate-cut expectations take a step back,” Kenwell added.
– Bond pressure –
The yield on US government bonds jumped following the jobs report.
Across the Atlantic, UK 10-year bond yields remained high after surging to their highest level since the 2008 global financial crisis, amid talk the government may have to make spending cuts or hike taxes to help repay state debt.
The pound remained under pressure after hitting levels against the dollar on Thursday not seen since late 2023.
“The global bond selloff showed few signs of letting up… with long-term borrowing costs continuing to move higher,” noted Jim Reid, managing director at Deutsche Bank.
