Stocks Fall, Bond Yields Surge After U.S. Economy Adds Back 467,000 Jobs In January

Topline

The stock market fell on Friday while bond yields surged after the U.S. economy added back a much higher-than-expected 467,000 new jobs in January, a sign to investors that the Federal Reserve will continue with its plans to aggressively tighten monetary policy and raise interest rates.

Bond yields are surging again as investors worry about upcoming rate hikes.

Richard Drew/ASSOCIATED PRESS

Key Facts

Stocks were moving lower following the jobs report Friday: The Dow Jones Industrial Average plunged 0.3%, over 100 points, while the S&P 500 rose 0.1% and the tech-heavy Nasdaq Composite 0.9%.

The U.S. economy added 467,000 jobs in January—far more than the 150,000 expected and the nearly 200,000 jobs added in December 2021, according to new data from the Labor Department.

The jobs data signaled to investors that the Federal Reserve will continue to move aggressively in hiking interest rates, however, a prospect which has sent yields surging and ushered in the stock market’s worst start to a year since 2009.

The report sent government bond rates higher, with the U.S. 10-year Treasury note jumping above 1.9%, its highest level since January 2020 and up from 1.5% at the start of this year.

Some tech stocks rose on Friday, meanwhile, boosting the Nasdaq slightly higher: Shares of e-commerce giant Amazon jumped 12% after it saw record revenue of nearly $140 billion last quarter, while Snap skyrocketed over 40% after reporting its first quarterly profit ever.

Shares of legacy automaker Ford, which has been expanding into electric vehicles, plunged 10% after lackluster earnings and revenue last quarter, with the company blaming missed production targets on supply chain issues.

Crucial Quote:

While the strong jobs report is “good news” for the economy and American workers, “unfortunately for the stock market” it will add to concerns that the Federal Reserve is going to be “forced to raise rates more quickly and to a higher level,” says Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.

Tangent:

Tech stocks have been struggling recently, with the Nasdaq falling 3.7% on Thursday alone. The index was dragged down by Facebook-parent Meta’s dismal quarterly earnings report, which showed declining users and surging expenses related to the company’s metaverse project. Facebook’s stock crashed 26%—wiping out over $230 billion in market value—in what was the biggest single-day value drop in stock market history.

Key Background:

Treasury yields have been rising, adding pressure to growth and tech stocks in particular, as the Federal Reserve tightens monetary policy and prepares to raise interest rates. With that uncertainty looming large over investors, the stock market has had its worst start to a year since 2009, with the S&P 500 falling over 5% in January. The tech-heavy Nasdaq Composite lost 9% in that period—its worst January since 2008—and still remains in correction territory, down more than 10% from its record highs last November.

What To Watch For:

The central bank last month announced that it would hike rates “soon,” beginning in March, as it looks to combat a decades-high surge in inflation and ease concerns about a wider stock market selloff in January. Beyond predicting three rate hikes for 2022, Fed Chairman Jerome Powell said last month that there was “quite a bit of room” to further raise rates as needed before harming the labor market.