Wall Street plunge in reaction to NFP data

US stocks plunged lower on Friday morning as traders digested the much stronger than expected jobs report for January, but recovered a little bit by midday trading after the US jobs report far exceeded expectations while the unemployment rate fell to a historic low of 3.4%.

Stock market’s steep decline came after jobs figures showed a much stronger than expected labor market and added to investor fears that the Fed will continue with its painful rate-hiking cycle through the year.

Despite the down day, the Nasdaq Composite is off to the best start to the year since 1975. The S&P 500 is trading near its highest levels in five months.

All major averages are also on track for a positive week. The S&P 500 gained more than 2% this week. The Nasdaq Composite is up about 4% and is likely to notch its fifth consecutive winning week. The Dow is also higher this week, by about 0.4%.

The Dow was up 21 points, or 0.1%, on Friday afternoon.

The S&P 500 fell by 0.4%.

The Nasdaq Composite was 0.3% lower.

The NFP news that employers added 517,000 workers in January is only one aspect of the strength in the US jobs market. The Labour Department also issued revisions of jobs numbers over the past two years, as it does every time it issues a January report. And this time, the revisions were also huge.

The revised numbers show that employers had a total of 154.6 million workers on payrolls at the end of 2022. That’s 813,000 more workers than the previous reading.

Much of that gain came in late 2021 and early 2022. In the 12 months ending in March of last year, there were 7.1 million jobs added as the economy recovered from the hit it took during the pandemic. That accounts for 617,000 more jobs than the Bureau of Labour Statistics had previously been estimated had been added during that 12-month period.

London’s FTSE 100 stock index closed at a record high on Friday, boosted by strong employment data from the United States.

The index jumped 1.04% on Friday to hit 7,901.8 points — its highest level ever — beating its previous record set in May 2018.

The index, which is made up of the 100 most valuable companies listed in London, rose as the pound fell 1.2% against the dollar on the back of the bumper US jobs report. Many companies in the index generate their profits in US dollars, so a weaker GBP boosts profits.