Wall Street opened sharply lower on Friday, amplifying the downturn begun at the start of the week amid renewed fears that the Fed will slow its rate-cutting cycle.

At the end of the morning, the Dow Jones dropped 1.5% to 42,000.4 points, while the Nasdaq Composite fell 1.8% to 19,104.6 points.

Investors were caught cold this morning by much higher-than-expected job creation figures for December, which cast doubt on the Federal Reserve's rate cut expectations.

According to statistics published by the Labor Department, the US economy created 256,000 non-farm jobs in December.000 non-farm payrolls last month, compared with economists' forecasts of just 170,000.

These data could prompt the Federal Reserve to take a wait-and-see approach to rate cuts.

'This will reinforce the Fed's wait-and-see stance', comments Bastien Drut, Head of Strategy and Economic Research at CPR AM.

Since Fed boss Jerome Powell's more cautious comments last month, any better-than-expected statistics have been greeted with caution because of their supposed impact on the Fed's timetable.

For the week as a whole, reduced to four sessions due to the Jimmy Carter tribute day, the Dow Jones lost 1.7%, while the Nasdaq was down 2.6%.

Wall Street's bearish reaction in the wake of these figures shows that the "good news is bad news" sentiment has indeed made a comeback across the Atlantic, and that markets are more worried about the Fed's rate trajectory than they are pleased with the health of the US economy.

Some believe that US equity markets are becoming increasingly vulnerable to profit-taking after last year's spectacular rise.

"The key question now is how far the markets can bear the pressure before capitulating", warns Florian Ielpo, Head of Macroeconomic Research at Lombard Odier Investment Managers.

Other analysts continue to expect strong performances from US equities, which are considered a must in the current uncertain environment.

Wars, crises, pandemics, Democrats or Republicans in power - whatever happens, the United States and the US stock market do well every time", says Christopher Dembik, Investment Strategy Advisor at Pictet AM.

This will certainly be the case again this year", says the professional.

"This doesn't mean that there won't be a stock market correction", stresses the Pictet AM strategist.

"On the other hand, it won't call into question the fundamental upward momentum of US equities", he concludes.

New York indices trimmed their losses somewhat on the release of a sharper-than-expected decline in the University of Michigan's consumer confidence index, which points in the direction of further monetary easing.

Its confidence index fell to 73.2 from 74 last month, while economists and analysts were forecasting a more limited decline to 73.9.

But the UMich attributes this deterioration to the concerns expressed by households regarding the evolution of their inflation expectations, which have been widely revised upwards.

This analysis, which points to a resurgence of inflationary pressures and lesser rate cuts by the Fed, ultimately led Wall Street to resume its sharp decline.

The prospect of the Fed cutting rates less rapidly than previously anticipated logically favors a rise in US government bond yields.

The ten-year Treasuries yield rose to over 4.75%, after returning in the morning to its highest level since autumn 2023, at 4.79%.

By reducing the likelihood of a sharp rate cut in the months ahead, the monthly US employment figures gave the dollar a boost.

The euro fell back towards 1.0230 against the greenback, its lowest level since November 2022.

Oil prices are heading for a third consecutive week of gains, buoyed by signs of vigorous activity, which are taking precedence over fears about interest rate trends.

The February contract for WTI climbs almost 4% to $76.9 a barrel.

Copyright (c) 2025 CercleFinance.com. All rights reserved.