Job Market Boom Shakes Wall Street: Fed Rate Cuts Now in Jeopardy

December's explosive jobs report rewrites the playbook--investors brace for turbulence as markets react

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4 hours ago
Summary
  • 256K jobs added, unemployment hits 4.1%, Fed pivots unlikely—markets spiral as rate cut hopes fade
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The December jobs report just dropped a bombshell: 256,000 new jobs added, obliterating forecasts of 155,000. Unemployment slipped to 4.1%, its lowest since mid-2024, proving the labor market isn't slowing down anytime soon. Big winners? Healthcare, leisure, and retail led the charge, while manufacturing lagged, losing jobs for the fourth time in five months. For investors, the immediate reaction was clear—Treasury yields soared, the stock market tumbles. At the time of writing, S&P 500 (SPY, Financial) dropped 1.7%, Dow Industrials (DIA, Financial) declined by 1.6% whereas Nasdaq (QQQ, Financial) decreased by 2%.

The takeaway? Don't hold your breath for rate cuts. Average hourly wages ticked up 0.3% last month, keeping annual wage inflation at 3.9%. That's enough to keep Fed Chair Jerome Powell from hitting the panic button. Futures markets have now priced in just a 68.5% chance of one rate cut this year, dashing hopes for the swift monetary easing many had banked on. As Dan North at Allianz Trade mentioned that Powell's job just got easier—there's no rush to cut rates when the economy looks this strong.

What's next? Eyes are glued to next week's inflation report, but even a big surprise might not move the needle for the Fed. For now, the market is navigating a tricky balance: a strong economy that's great for growth but bad for those hoping for easier monetary conditions. With volatility surging and expectations shifting, now's the time for investors to buckle up and stay sharp. The road ahead looks anything but smooth.

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I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours. Click for the complete disclosure