Wall St drops after payrolls data; small-cap index set to confirm correction

NEW YORK: Wall Street’s main indexes fell on Friday, with the S&P 500 touching a one-week low after an upbeat jobs report stoked fresh inflation worries and reinforced bets that the Federal Reserve will take a cautious approach to interest rate cuts this year.

Along with the day’s declines of about 1.9%, the domestically focused small-cap Russell 2000 index was on course to plunge into a correction, having fallen about 10% from its record high hit in late November.

At 10:01 a.m. the Dow Jones Industrial Average fell 555.96 points, or 1.31%, to 42,074.56, the S&P 500 lost 90.46 points, or 1.55%, to 5,826.73 and the Nasdaq Composite lost 390.73 points, or 2.02%, to 19,085.99.

A Labor Department report showed job growth unexpectedly accelerated in December while the unemployment rate fell to 4.1% as the labor market ended the year on a solid footing.

Traders now see the central bank lowering borrowing costs for the first

time in June and then staying steady for the rest of the year, according to the CME Group’s FedWatch Tool.

Pressuring stocks, the yield on the 30-year Treasury note spiked over 5% - its highest since November 2023, while Wall Street’s fear gauge touched a more than two-week high.

Eight of the 11 S&P 500 sectors declined, led by a 1.8% drop in technology stocks, while rate-sensitive financials and real-estate also lost 1% each.

“It’s a good news report. It’s very positive for the economy, but the markets are worried that a strong economy is going to be inflationary,” said Thomas Martin, senior portfolio manager at Globalt Investments.

Adding to the dour mood, a University of Michigan survey showed consumer mood dropped to 73.2 in January from the previous month.

Wall Street’s main indexes are poised to close their second consecutive week in the red, with the benchmark S&P 500 down nearly 4% from its record high hit a month ago.

Fresh inflation worries have taken the spotlight, compelling the Fed to issue a cautious forecast on monetary easing last month, as it anticipates policy changes on trade and immigration under President-elect Donald Trump, who is expected to take office in 10 days time.

Multiple reports on his plans, including one on imposing a national economic emergency to fast track tariff implementation, have left investors on edge about their potential impact on the economy and global trade.

Voting members on the Federal Open Market Committee have voiced

the need for a measured approach to lowering

borrowing costs this year, the latest being St. Louis Fed President Alberto Musalem according to a report.

Chip stocks such as Nvidia dropped 3.2%, weighed down by a report that the US could announce new export regulations as early as Friday.

Delta Air Lines rose 10.6% after forecasting a higher-than-expected annual adjusted profit. Earnings reports will be in full swing next week.

Insurance companies such as Mercury General slumped 21.3% and Travelers fell 2.3% on expectations of high industry losses from wildfires in Los Angeles Declining issues outnumbered advancers by a 4.39-to-1 ratio on the NYSE and by a 3.74-to-1 ratio on the Nasdaq.

The S&P 500 posted five new 52-week highs and 22 new lows, while the Nasdaq Composite recorded 20 new highs and 119 new lows.