US markets faced a sharp sell-off on Friday, with all major indices posting significant losses after a stronger-than-expected jobs report reignited concerns about the Federal Reserve’s interest rate policy. The Dow tumbled nearly 700 points, while the S&P 500 and Nasdaq also suffered steep declines, driven by heightened fears of prolonged monetary tightening. Investors faced with the implications of robust labour market data and rising bond yields, which dampened expectations for further rate cuts this year. The latest inflation outlook and consumer sentiment reports added to the uncertainty, further weighing on growth-sensitive stocks.

Key Takeaways:

  • Dow Suffers Major Losses Amid Jobs Data Shock: The Dow Jones Industrial Average plummeted 696.75 points, or 1.63%, to close at 41,938.45. Friday’s sharp decline followed the release of unexpectedly strong labour market data, which rattled investor confidence in a near-term rate-cut path from the Federal Reserve. 
  • S&P 500 and Nasdaq See Steep Declines: The S&P 500 fell 1.54% to settle at 5,827.04, erasing earlier gains for the week, while the tech-heavy Nasdaq Composite mirrored the Dow’s performance, shedding 1.63% to close at 19,161.63. Both indices have now posted back-to-back weekly losses, with the S&P 500 down 1.9% and the Nasdaq off 2.3% for the week, underscoring the growing pressure on risk assets amid tightening financial conditions.
  • Labour Market Data Exceeds Expectations: US nonfarm payrolls surged by 256,000 in December, significantly outpacing the Dow Jones forecast of 155,000. The unemployment rate also surprised markets by dropping to 4.1%, below the expected 4.2%. An alternative measure of unemployment, which includes discouraged workers and part-time employees, declined to 7.5%, the lowest level since June 2024. Meanwhile, The University of Michigan’s consumer sentiment index for January came in at 73.2, below the Dow Jones estimate of 74. The report revealed a troubling uptick in inflation expectations, with one-year outlooks rising to 3.3% from 2.8% and five-year projections climbing to 3.3%, their highest level since June 2008.
  • Treasury Yields Surge on Strong Jobs Data: The 10-year Treasury yield spiked nearly six basis points to 4.745%, its highest level since late 2023. Meanwhile, the 2-year Treasury yield climbed more than 10 basis points to 4.369%, reflecting the market’s recalibration of Federal Reserve policy expectations. The stronger-than-anticipated jobs report sharply reduced the odds of a March rate cut.
  • European Markets Close Lower as Bond Yields Rise: The pan-European Stoxx 600 index declined by 0.83%, with utilities and food and beverage sectors leading the losses, both falling 2.3%. The DAX dropped 0.5%, while France’s CAC 40 shed 0.8%, reversing earlier gains. Meanwhile, bond yields across the Eurozone surged, with Germany’s 10-year bund yields hitting multi-month highs of 2.566%. UK 10-year gilt yields rose nearly three basis points to 4.839%, their highest levels since the 2008 financial crisis, as concerns about sticky inflation and weak economic data intensified.
  • Asia-Pacific Markets Hit by Mixed Data: Asia-Pacific indices largely closed lower on Friday, with mainland China’s CSI 300 leading the losses, falling 1.25% to 3,723.48—its lowest level since September 2024. Japan’s Nikkei 225 dropped 1.05% to 39,190.4, marking its third consecutive day of losses, while the broader Topix fell 0.8% to 2,714.12. South Korea’s Kospi snapped its five-day winning streak, declining by 0.24%, while Australia’s S&P/ASX 200 slipped 0.42% to 8,294.1. Heavyweight sectors like tech and household goods were particularly affected, reflecting continued caution amid global economic uncertainty.
  • Oil Prices Hit Multi-Month Highs Following Sanctions: Oil prices surged to their highest levels since October, with Brent crude climbing $2.84, or 3.69%, to settle at $79.76 per barrel. US crude oil gained $2.65, or 3.58%, to close at $76.57 per barrel. The rally followed the US Treasury Department’s announcement of sweeping sanctions on Russia’s oil sector, targeting major companies and executives. These sanctions, coupled with ongoing supply concerns, reignited bullish sentiment in the energy markets.

FX Today:

  • EUR/USD Pressures Key Support Amid Dollar Strength: The EUR/USD pair continued its descent on Friday, trading at 1.0247, down 0.50% for the session. The pair has been on a sharp downtrend, reflecting the strength of the US dollar following the robust jobs report and rising Treasury yields. EUR/USD remains below critical moving averages, including the 50-day SMA at 1.0517, the 100-day SMA at 1.0767, and the 200-day SMA at 1.0790. Immediate support lies at the psychological 1.0200 level. Resistance levels are seen at 1.0300 and the 50-day SMA at 1.0517, with RSI readings nearing oversold territory, signalling a possible corrective bounce.
  • GBP/USD Hits Multi-Year Low as Bears Dominate: GBP/USD dropped 0.77% on Friday, trading at 1.2212 and breaking below critical support levels. The pair is now at its lowest level since September 2023, weighed down by UK economic concerns and the strengthening US dollar. GBP/USD remains well below the 50-day SMA at 1.2652, the 100-day SMA at 1.2896, and the 200-day SMA at 1.2803, underscoring a strong bearish trend. Immediate resistance stands at 1.2300, with further resistance at 1.2400. On the downside, the psychological 1.2000 level serves as a significant support barrier, a level previously tested during sharp pound depreciations in mid-2023. 
  • USD/CAD Strengthens on Canadian Job Gains and Oil Surge: The USD/CAD pair traded at 1.4426, up 0.23% on Friday, as the Canadian dollar gained strength following better-than-expected December jobs data. Canada added 90.9K jobs, marking a two-year high for monthly employment gains. USD/CAD remains above major moving averages, including the 50-day SMA at 1.4147 and the 200-day SMA at 1.3799, underscoring the pair’s sustained uptrend. Immediate resistance lies at 1.4500, a key psychological level, with further upside potential toward 1.4600. On the downside, support levels are seen at 1.4300 and 1.4200, which could be tested if CAD continues to benefit from strong domestic data or oil price recovery.
  • USD/JPY Consolidates Near Multi-Year Highs: USD/JPY traded at 157.708 on Friday, down 0.25% but still consolidating near its multi-year high of 158.874. The pair has maintained a firm uptrend, supported by the divergence in monetary policy between the Bank of Japan and the Federal Reserve. USD/JPY remains above key moving averages, with the 50-day SMA at 154.262, the 100-day SMA at 150.297, and the 200-day SMA at 152.640. Immediate resistance is seen at 158.500, with the psychological level of 160.000 acting as a critical upside target. On the downside, support lies at 156.000, with the 50-day SMA providing additional protection. 
  • Gold Rallies to Multi-Month Highs Despite Strong US Data: Gold prices extended their rally for a fourth consecutive day on Friday, trading at $2,692.27, up 0.85% for the session. The precious metal maintained its bullish momentum despite the stronger-than-expected US jobs report, reflecting continued demand for safe-haven assets amid inflation concerns and geopolitical uncertainty. Gold remains above key moving averages, including the 50-day SMA at $2,645.44, the 100-day SMA at $2,632.42, and the 200-day SMA at $2,502.08. Immediate resistance lies at $2,700, with further gains likely targeting $2,750. On the downside, support is seen at $2,650, with additional protection at $2,600. 

Market Movers:

  • Delta Air Lines Soars on Strong Earnings Beat: Delta Air Lines surged 9% on Friday after reporting better-than-expected fourth-quarter results. The airline posted adjusted earnings of $1.85 per share, beating the forecasted $1.75 per share. 
  • Constellation Energy Surges on Acquisition News: Constellation Energy saw its stock skyrocket by 25.2% following the announcement of its $26.6 billion acquisition of geothermal and natural gas company Calpine. 
  • Capri Holdings Gains on Upgrades: Shares of Capri Holdings jumped 10.2% after receiving upgrades from both Citi and Wells Fargo. Analysts highlighted a recovery in margins and dismissed concerns about the long-term viability of the company’s brand portfolio. 
  • Edison International Sinks Amid Wildfire Concerns: Shares of Edison International, a Southern California-based utility provider, fell over 6% on Friday as deadly wildfires continued to burn in Los Angeles. Although the company denied involvement in starting the fires, it has been asked by insurers to preserve evidence, raising investor concerns about potential liabilities. The stock has now dropped over 16% this week.
  • Walgreens Boots Alliance Surges on Earnings Beat: Walgreens Boots Alliance climbed 27.8% after delivering better-than-expected fiscal first-quarter results. The company reported adjusted earnings of 51 cents per share, significantly above the 37 cents per share forecasted by analysts. 
  • Jefferies Financial Group Declines on Weak Earnings: Jefferies Financial Group slid 10.8% after reporting weaker-than-expected fourth-quarter earnings. The company posted earnings of 93 cents per share, below the forecasted 97 cents per share.

As the week drew to a turbulent close, global markets faced significant headwinds from stronger-than-expected US labour market data, which renewed fears of prolonged Federal Reserve tightening. The Dow’s sharp 696-point decline, coupled with losses in the S&P 500 and Nasdaq, highlighted investor unease as bond yields surged to multi-month highs. European and Asian markets also struggled, with steep losses in China’s CSI 300 and Japan’s Nikkei reflecting regional vulnerabilities. Meanwhile, oil prices rallied on US sanctions against Russia, and gold surged to its highest levels since late 2024, underscoring the broader market uncertainty. As investors brace for the Federal Reserve’s next moves, the focus remains on inflationary pressures.