U.S. employment data for December exceeded expectations, causing significant declines in major stock indices. Job creation surged with 256,000 new positions and a slight drop in the unemployment rate to 4.1%. This robust labor market raises concerns about persistent inflation, influencing Federal Reserve policy. While most sectors fell, energy stocks thrived amid rising oil prices. Notable corporate gains included Constellation Energy’s 22.95% rise after acquiring Calpine and Delta Air Lines’ 9.38% increase due to strong travel demand.
Market Reactions to U.S. Employment Data
The New York Stock Exchange experienced a significant decline on Friday, reacting to U.S. employment statistics for December that surpassed forecasts. This unexpected data hinted at a potential pause in the Federal Reserve’s rate-cutting strategy. By around 15:10 GMT, major indices were feeling the pinch: the Dow Jones dropped by 1.44%, the Nasdaq fell by 2.26%, and the S&P 500 decreased by 1.71%. Adam Sarhan from 50 Park Investments remarked, “Sales are multiplying across all asset categories after the employment report was released.”
Unemployment Rate and Job Creation Insights
Job creation in the U.S. surged in December, leading to a modest reduction in the unemployment rate, which ran counter to market anticipations of a slowdown. The month saw the addition of 256,000 jobs, an increase from the previous month’s figures, which were slightly adjusted down to 212,000 from an initially stated 227,000. Consequently, the unemployment rate dipped to 4.1%, down by 0.1 percentage points, according to Labor Department data. Economists had predicted only 155,000 new jobs and a stable unemployment rate of 4.2%, as per MarketWatch’s consensus.
Patrick O’Hare from Briefing.com noted, “The main takeaway from this report is that it may have been too positive, which fuels the prospect of persistent inflation, as the labor market remains strong.” These statistics could have serious implications for the Federal Reserve’s monetary policy. The Fed is vigilant about employment figures, as it strives for price stability with a long-term inflation target of 2% while also aiming for near-full employment.
Summarizing the situation, Mr. Sarhan stated, “We find ourselves in a scenario where the Fed’s rate cut in December could be the last for the foreseeable future.” He emphasized that the employment figures “scared the markets and triggered significant selling pressure.”
In the bond market, the aftermath of the report saw a sharp rise in the yield on ten-year U.S. Treasury bonds, which surged to 4.79% before easing back to 4.74% around 14:55 GMT. The yield on the 30-year bond also saw fluctuations, breaching the 5% mark before settling at 4.96%.
On the stock market front, most sectors faced declines due to the employment report. However, energy stocks performed well, driven by rising oil prices amidst potential U.S. sanctions against the Russian “ghost fleet,” which may affect Kremlin oil exports. Chevron increased by 2.04%, Exxon Mobil by 1.42%, and ConocoPhillips by 1.32%.
In notable corporate news, American Constellation Energy, a leading nuclear power operator in the U.S., soared by 22.95% after announcing its acquisition of energy company Calpine for nearly $27 billion, including debt. This merger positions them as the largest green energy supplier in the U.S., reflecting the growing demand for electricity spurred by advancements in artificial intelligence.
Delta Air Lines also saw a surge of 9.38%, driven by better-than-expected results in the fourth quarter of 2024, fueled by strong demand for both leisure and business travel. Additionally, Walgreens Boots Alliance experienced a significant boost of 24.67% after reporting results that surpassed analysts’ expectations for the first quarter of its staggered fiscal year, which concluded on November 30.