Treasury yields jumped, the dollar surged and global equities edged higher on Friday after a blowout U.S. jobs report scuttled any lingering hopes for a near-term cut in interest rates and underscored a strong economy that can ward off a recession.
Nonfarm payrolls increased by 353,000 jobs in January, the Labor Department’s Bureau of Labor Statistics said, almost double the 180,000 forecast by economists polled by Reuters.
The benchmark 10-year Treasury note yield shot above 4% and the dollar gained against all major currencies as employers added far more jobs than expected and average hourly earnings increased 0.6% after rising 0.4% in December.
The data came after the Federal Reserve on Wednesday pushed back against expectations for an imminent rate cut, with Chair Jerome Powell warning inflation was “still too high.”
The jobs report showed the market had gotten too far ahead of when it expected the Fed to cut rates, said Kevin Gordon, senior investment strategist at Charles Schwab in New York.
“In the short term there’s going to be a little bit of a digestion phase because the market had been expecting the Fed to cut sooner,” Gordon said. “But in the medium term, it could still be a good thing because generally a resilient labor market, strong economy is good for stock prices.”
