US stocks decline post robust NFP data

The Dow Jones Industrial Average plummeted over 700 points on Friday, following the release of unexpectedly strong Nonfarm Payrolls (NFP) data for December. This robust jobs report, significantly exceeding market expectations, dampened hopes for imminent Federal Reserve (Fed) interest rate cuts. Simultaneously, the University of Michigan consumer sentiment survey revealed a rise in inflation expectations, further souring investor sentiment.

The unexpectedly strong NFP figures, coupled with elevated inflation expectations, significantly reduced the likelihood of aggressive Fed rate cuts in 2025. This shift in market sentiment led to a sharp decline in equities as investors sought safety in the US dollar. Major financial institutions, including Bank of America and Goldman Sachs, revised their forecasts, acknowledging a diminished possibility of rate cuts. Consequently, interest rate futures markets now anticipate only a single 25-basis-point rate cut this year, with the earliest possible timing being June.

The Dow Jones experienced broad-based selling pressure, with only a handful of stocks managing to close in the green territory.

Travelers Companies and Goldman Sachs led the decline, suffering significant losses on the day. This sharp downturn pushed the Dow Jones perilously close to its 200-day Exponential Moving Average (EMA) and below the 42,000 mark for the first time since early November.

While this decline may reignite concerns about a prolonged downturn, it’s crucial to note that the Dow Jones remains above its recent major swing low and is still significantly higher than its pre-bull run levels.