Hot employment report leads stocks lower, at least for now

Odds of an interest rate cut later this month are all but out the window

January 10, 2025 03:30 pm

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It’s US Employment Report Day! December’s figures came in much stronger than expected.

Nonfarm payrolls grew by 256,000 and blew past analysts’ forecast of 155,000 — significantly higher than November’s 212,000 positions added. The unemployment rate edged down just slightly, coming in at 4.1% vs. the expected 4.2%.

There is such a thing as a too hot report, though.

“There is a growing worry on Wall Street that inflation is making a comeback. While a strong labor market is good for the US, there are worries that too strong of a jobs market will put reflation back on the table,” said Bret Kenwell, US investment analyst at eToro.

The odds of an interest rate cut later this month are all but out the window, and chances central bankers opt to lower fed funds in March or even May aren’t looking great, either.

US equities, after a decent start to the new year, are now solidly in the red for 2025 — likely an impact of diminished rate cut expectations and growing concern that the devastating fires in Los Angeles will come with significant financial consequences.

Still, a resilient labor market and economic growth — which, according to the data, is where we currently stand — isn’t bad for stocks, according to Jessica Rabe, co-founder of DataTrek Research.

The employment situation bodes well for corporate profitability.

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