US stock indexes dropped on Friday, while the dollar tumbled to multi-month lows against the euro and yen after the latest jobs report showed fewer job gains than expected. Meanwhile, US 10-year Treasury yields declined as markets increased bets on Federal Reserve rate cuts.
Jobs Report Sparks Market Volatility
Nonfarm payrolls rose by 151,000 in February, falling short of economists’ expectations, while the unemployment rate edged up to 4.1%. The report, the first under President Donald Trump’s second term, capped a week of uncertainty surrounding US trade policy and rising global borrowing costs.
Wall Street’s major stock indexes traded in and out of negative territory before turning decisively lower. On Thursday, the Nasdaq Composite officially entered correction territory, down more than 10% from its December peak, as investors reacted to Trump’s tariff announcements.
“The reaction that we’re seeing in the bond market gives more credence to growth concerns,” said Jordan Rizzuto, managing partner and chief investment officer at GammaRoad Capital Partners.
Rate Cut Expectations Rise
Following the jobs data, traders adjusted their expectations for Federal Reserve policy, pricing in a higher likelihood of rate cuts starting in June.
“The market is back to pricing in three rate cuts in 2025, but I wouldn’t bank on the Fed sending any dovish signals anytime soon,” said Brian Jacobsen, chief economist at Annex Wealth Management. “With the unemployment rate at 4.1% and inflation still above target, they have no reason to change their messaging yet.”
Stock and Bond Market Reactions
Germany’s 10-year bond yield, which serves as the benchmark for the euro zone, fell 5.5 basis points to 2.83% after a historic two-day sell-off. In the US, the benchmark 10-year Treasury yield dropped 2.3 basis points to 4.259%.
Meanwhile, equity markets saw significant declines:
- The Dow Jones Industrial Average fell 374.52 points (-0.88%) to 42,204.56.
- The S&P 500 dropped 65.78 points (-1.15%) to 5,672.74.
- The Nasdaq Composite lost 276.92 points (-1.52%) to 17,793.96.
Globally, the MSCI world stock index declined 0.43%, while Europe’s STOXX 600 dropped 0.5%, snapping a 10-session winning streak.
Currency and Commodity Markets
The euro continued its rally, gaining 0.72% to trade at $1.0861, marking its best week since 2009. Against the Japanese yen, the dollar weakened 0.34% to 147.44.
On the energy front, oil prices climbed, with US crude rising 1.48% to $67.34 per barrel, while Brent crude gained 1.54% to $70.53 per barrel.
Looking Ahead
With uncertainty surrounding trade policy and economic growth, investors will be closely watching Federal Reserve signals ahead of its March 18-19 policy meeting to gauge the outlook for interest rate cuts.
