Markets are reacting sharply today to a slew of macroeconomic data releases combined with earnings results from major tech giants, causing increased volatility across asset classes. From my perspective, what stands out most in today’s financial landscape is the persistent strength in the U.S. labor market and its implications for the Federal Reserve’s next policy moves.
Earlier today, the U.S. Department of Labor reported January’s Non-Farm Payrolls grew by 353,000, significantly beating the consensus estimate of 180,000. Not only did the headline number surprise to the upside, but wage growth also accelerated by 0.6% month-over-month, doubling expectations. This data reinforces the idea that the U.S. economy remains resilient, despite tight monetary policy. For equity markets, particularly the rate-sensitive tech sector, this has caused some repricing of expectations ahead of the Fed’s March meeting.
In the wake of this labor market data, U.S. Treasury yields surged, with the 10-year note jumping above 4.10%. This shift reflects a renewed belief that the Fed will keep rates elevated longer than previously anticipated. The market has now rolled back expectations for a March rate cut, instead pricing in a higher probability of a move in May or June. The DXY Dollar Index also gained momentum following the release, climbing to 104.30, as stronger yields bolstered the greenback.
Equities opened mixed, with the Nasdaq underperforming due to higher discount rates, while value names held up relatively well. Amazon’s Q4 earnings provided some cushion to tech sentiment, with the company posting strong cloud growth and robust retail margins. However, Apple’s report showed flat iPhone sales growth and softer guidance in China, which offset part of the optimism. This divergence in big tech earnings continues to highlight the bifurcation within the tech sector—companies with strong AI and cloud exposure outperform, while those heavily reliant on hardware sales face more challenging outlooks.
Commodities responded in kind—with gold prices pulling back to around $2,025/oz amid rising yields and a stronger dollar. Meanwhile, WTI crude saw a mild uptick, hovering near $74 per barrel, following reports of supply disruptions in the Middle East that could tighten global markets.
Looking abroad, the Eurozone’s CPI came in softer than expected, with YoY inflation at 2.8%, down from the prior month’s 3.0%. This data reinforces market bets that the ECB could begin easing policy as early as Q2, particularly as economic activity in Germany and France continues to soften. As a result, EUR/USD weakened toward 1.0790, pressured further by today’s strong U.S. labor data.
In Asia, sentiment remains cautious. The Hang Seng index briefly rebounded on expectations of further stimulus from Chinese authorities ahead of the Lunar New Year, though the gains were capped due to continued concerns over the property sector and muted consumer spending. Investors are watching closely for signals from the People’s Bank of China regarding possible rate cuts or liquidity infusions.
Overall, today’s developments point to a critical inflection point: while markets had begun pricing in a dovish pivot from central banks globally, today’s data underscores the complexity of navigating through disinflationary trends with underlying economic strength. The intersection of macro surprises and corporate earnings will continue to drive volatility in the coming weeks.