Strong Jobs Data Pushes Back Fed-Cut Timeline

Markets digested a stronger-than-expected January jobs report that eased recession concerns but reduced the urgency for Fed rate cuts. Treasury yields moved higher, particularly on the short end, as investors pushed out expectations for easing. Equities initially rallied on the growth signal but faded into the close, with weakness in megacaps offsetting broader participation. Commodities firmed, while cryptocurrencies pulled back.

Key Headlines & Market Movers:

• Labor Market Rebounds, Cuts Pushed Out: January payrolls rose by 130,000, well above expectations, and the unemployment rate dipped to 4.3%. While prior-year revisions confirmed slower hiring momentum in 2025, the latest print suggests stabilization rather than deterioration. Rate markets reacted quickly. Two-year Treasury yields climbed toward 3.5%, and traders now see the first Fed cut coming in July instead of June. The probability of a March cut is minimal.

Stocks Stall as Rates Rise: Major indexes finished little changed after an early rally. Roughly 300 S&P 500 names advanced, signaling underlying breadth, but megacap weakness weighed on the headline index. The equal-weight index outperformed, reinforcing the “broadening” theme toward cyclicals and old-economy sectors. Semiconductors outperformed, while software stocks lagged. Investors appear increasingly comfortable with growth holding up, but are recalibrating valuations in a higher-for-longer rate environment.

• Commodities and Crypto React: Oil rose on geopolitical concerns despite broader supply worries. Gold advanced as investors balanced higher yields against lingering inflation risks. Bitcoin pulled back toward $67,500, reflecting reduced expectations for imminent liquidity support from the Fed.

S&P 500 Sector Performance

Looking Ahead

The jobs report eases immediate recession fears but complicates the rate-cut narrative. The next key catalyst is inflation data. If CPI continues to trend lower, the Fed can ease later this year from a position of strength. A hotter print, however, could reignite rate volatility. For now, the backdrop supports selective risk-taking: a stable labor market, resilient earnings, and policy patience. Expect continued sector rotation, modest rate volatility, and markets increasingly driven by company-specific fundamentals rather than macro fear.

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