The Dow plunges 500 points as a strong jobs report and inflation fears crush rate cut hopes

The Dow fell over 500 points on Friday morning after new job reports surpassed expectations, and the Federal Reserve indicated that interest rate cuts may be postponed. Additionally, inflation remains a concern and is anticipated to stay high.

Shortly after trading began, the Dow Jones Industrial Average declined 566 points or 1.3%. The tech-heavy Nasdaq and S&P 500 shed 2% and 1.6%, respectively.

Meanwhile, the U.S. Treasury yields surged to levels not seen since November 2023. The 10-year Treasury yield climbed nearly 10 basis points, reaching 4.778%, reflecting heightened investor caution over the potential for sustained higher interest rates.

Job growth beats expectations

The last jobs report of 2024 showed the labor market in good shape after the Federal Reserve warned of a more cautious approach to interest rate cuts this year.

Nonfarm payrolls climbed 256,000 in December, according to data from the Bureau of Labor Statistics (BLS) released Friday. That blew past Wall Street’s expected 153,000 jobs for the month, per estimates compiled by FactSet (FDS-1.78%).

Unemployment held steady at 4.1%, down 0.1 percentage point from a month prior and below analysts’ projections.

The BLS said it upwardly revised job creation figures for October by 7,000, to 43,000 from 36,000. For November, the agency downwardly revised payrolls by 15,000, from 227,000 to 212,000. With the revisions, employment in October and November combined is 8,000 lower than was previously reported.

Stronger-than-expected jobs figures could give the Fed further incentive to slow the pace of interest rate cuts this year, as it balances both inflation and the health of labor market.

Walgreens and Delta surged after posting earnings

Shares of Walgreens (WBA+27.06%) surged over 24% on the S&P 500, making it the best-performing stock as the healthcare and pharmacy giant reported strong revenue. The company’s adjusted earnings per share reached 51 cents, significantly exceeding the consensus estimate of 37 cents. Additionally, revenue totaled $39.46 billion, far surpassing the forecast of $37.36 billion.

In a similar trend, shares of Delta Air Lines (DAL+10.44% jumped more than 9% on Friday morning, hitting a new 52-week high. The airline reported a better-than-expected earnings performance, with adjusted earnings per share coming in at $1.85, beating the forecast of $1.75. Adjusted revenue was also strong, reaching $14.44 billion, which exceeded the anticipated $14.18 billion.

—Rocio Fabbro contributed to the article