US equity markets closed Friday's trading session with modest gains, navigating a complex economic landscape shaped by a mixed employment report. The data, which presented a dual picture of the labour market, led investors to recalibrate their expectations for the timing of interest rate reductions by the Federal Reserve.
Market Reaction to the Jobs Data
Key indices showed resilience in early trading. The benchmark S&P 500 advanced by 0.2%, hovering close to the record high it achieved earlier in the week. The Dow Jones Industrial Average added 147 points, or 0.3%, while the technology-heavy Nasdaq composite remained largely unchanged.
The movement followed the release of the December jobs report from the US Labor Department. The data revealed that employers hired fewer workers than economists had projected. However, in a contrasting signal, the unemployment rate showed improvement, coming in better than forecasts. This combination reinforced analyst views that the US job market is settling into a "low-hire, low-fire" phase, indicating stability but slower growth.
Shifting Expectations for Federal Reserve Policy
The immediate market interpretation of the jobs data was a significant dialling back of expectations for an imminent interest rate cut. According to data tracked by CME Group, traders now see only a 5% probability of a rate reduction at the Fed's policy meeting later this month, a sharp drop from the 11% chance priced in just a day earlier.
This shift was reflected in the bond market. The yield on the two-year US Treasury note, which is sensitive to near-term Fed policy expectations, edged up slightly to 3.50% from 3.49%. Meanwhile, the yield on the benchmark 10-year Treasury held steady at 4.19%.
Despite pushing back the timeline for the first cut, market participants continue to anticipate monetary easing later in the year. Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management, noted, "Until the data provide a clearer direction, a divided Fed is likely to stay that way. Lower rates are likely coming this year, but the markets may have to be patient."
Corporate Movers: AI Power Demand and EV Setbacks
Friday's session featured notable swings in individual stocks, driven by company-specific news. The energy sector saw a major surge, with Vistra's stock soaring 14.6%. The jump came after the company signed a landmark 20-year agreement to supply electricity to Meta Platforms from three of its nuclear plants, underscoring the skyrocketing power demand from data centres that support artificial intelligence.
In a related deal, nuclear fuel company Oklo saw its shares jump 12% after announcing a separate agreement with Meta to help secure nuclear fuel and advance its project in Ohio.
These gains helped offset losses elsewhere. General Motors shares fell 1.6% after the automaker announced it would take a substantial $6 billion charge against its fourth-quarter 2025 results. This is linked to its strategic pullback from certain electric vehicle initiatives, attributed to weaker demand influenced by fewer tax incentives and looser emissions regulations.
Consumer products company WD-40 tumbled 13.7% after reporting quarterly profit that fell short of analyst expectations. The company clarified that the shortfall was due to timing issues related to shipments rather than a drop in underlying consumer demand.
Global Market Context
The cautiously optimistic mood in the US was mirrored in major global markets. In Europe, France's CAC 40 index rose 1%. In Asia, Japan's Nikkei 225 climbed 1.6%, buoyed by a stellar performance from Fast Retailing, the parent company of the Uniqlo brand. Its shares jumped 10.6% after reporting a nearly 34% year-on-year increase in quarterly operating profit and raising its full-year forecast.
The collective global performance suggests that investors are digesting the evolving narrative around central bank policies while focusing on corporate fundamentals and sector-specific growth stories, particularly in technology and AI-related infrastructure.
