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Stocks wavered Friday in response to good news about the economy, a development that will take some explaining.
A government report Friday morning showed U.S. employers added a whopping 256,000 jobs in December. The unemployment rate fell to 4.1%.
Yet, at the opening bell, the stock market responded with trepidation. Shortly after trading began, the Dow Jones Industrial Average was down 0.6%. The S&P 500 was down 0.8%. The Nasdaq was down 1.5%.
The reason: A booming economy feeds fears that the Federal Reserve could reverse course on lowering interest rates. A popular FedWatch forecast shows near-certainty that the Fed will leave interest rates untouched at their January meeting. Many traders don’t think regulators will order another rate cut until summer. The Fed typically lowers interest rates to stimulate the economy and raises them to slow it.
A strong jobs report is bad news for stocks
The strong jobs report “will be good news for the U.S. economy and the US dollar, unwelcome news for equities,” meaning stocks, said Seema Shah, chief global strategist at Principal Asset Management.
Other observers concurred.
“We expect the S&P 500 to trade down in the 0.5%-1.25% range today,” said Larry Tentarelli, chief technical strategist for Blue Chip Daily Trend Report, in response to the jobs report.
The yields on long-term bonds have been rising, with the 10-year Treasury bond now offering an interest rate of nearly 4.8%. A higher bond yield means a declining bond market: Bond prices fall as yields rise.
The day looks better for bitcoin traders. The cryptocurrency was up 1.8%, though still well below the $100,000 mark.
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