January Job Report: Unemployment Rate Hits Lowest Since 1969, Market Reacts

On Friday, the U.S. Labor Department reported that the economy added 517,000 jobs in January, far exceeding economist expectations of 187,000 new jobs.[0] The unemployment rate fell to 3.4%, its lowest since 1969, while average hourly earnings rose 0.3%, in line with expectations.

Meanwhile, the Dow Jones Industrial Average (DJI) fell 0.1%, the S&P 500 (SP500) gained 1.5%, and the Nasdaq Composite (^IXIC) rallied nearly 3.3%.[1] Yields also rose, with the 10-year Treasury yield (US10Y) 13 bps higher at 3.53% and the 2-year yield (US2Y) up 21 bps at 4.30%.

Fed-funds futures show traders see a 25 basis point interest rate hike by the Fed in March as nearly assured and raised the odds of another 25 basis point rise in May, putting market expectations for the peak in interest rates nearer the Fed’s forecast above 5%.[2]

META Platforms (META) reported a decrease of 52% in earnings per share, which was in line with expectations, while revenue dropped 4%, slightly surpassing forecasts.[3] Stock prices rose sharply as the parent company of Facebook declared that it would focus on becoming more efficient in 2023, following its large investments in the metaverse in 2022.[4] Q1 revenue showed an increase, and capital spending, as well as other anticipated expenses for the year, were reduced.[3] It additionally declared a repurchase of $40 billion.[4]

The number of nonfarm payrolls increased to 517K, which is significantly higher than the 185K expected by the consensus and the 260K from the prior reading.[5] The unemployment rate decreased to 3.4% from 3.5%, which was lower than the projected 3.6%.

Ford Motor Co. (F) ended 7.6% lower after reporting a $2 billion loss in 2022 and mixed quarterly results. Amazon (AMZN) unveiled better-than-expected sales growth in the fourth quarter but disappointed on profit — largely the result of big losses from its stake in electric vehicle maker Rivian Automotive.[6]

The Bank of England (BOE) raised its bank rate by 50 bp to 4.00%, as expected, and said it sees a shorter, shallower recession than its November outlook.[7]

Overall, the jobs report spurred selling in fixed income, sending yields higher.[8] The yield of the 10-year Treasury (US10Y) increased by 14 basis

0. “After This Week’s Fed Rate Hike, Jobs Number Surprise And Key Earnings Reports, What’s Next For The Marke” Benzinga, 3 Feb. 2023, https://www.benzinga.com/top-stories/23/02/30713561/after-this-weeks-fed-rate-hike-jobs-number-surprise-and-key-earnings-reports-whats-next-for-the-mark

1. “Dow Jones Slides 175 Points On Stunning Jobs Report; Apple Stock Reverses Higher On Earnings” Investor’s Business Daily, 3 Feb. 2023, https://www.investors.com/market-trend/stock-market-today/dow-jones-futures-fall-ahead-of-january-jobs-report-alphabet-amazon-apple-drop-on-earnings/

2. “Stocks fall on Friday, but S&P 500 notches winning week as strong 2023 continues” CNBC, 2 Feb. 2023, https://www.cnbc.com/2023/02/02/stock-futures-fall-after-earnings-reports-from-apple-alphabet-disappoint-investors.html

3. “Stock Market Today: Nasdaq Skyrockets After Meta Earnings, Buyback News” Kiplinger’s Personal Finance, 2 Feb. 2023, https://www.kiplinger.com/investing/stocks/stock-market-today-020223-nasdaq-skyrockets-after-meta-earnings-buyback-news

4. “Market Rally Powers Higher On Tame Fed, Meta: Weekly Review” Investor’s Business Daily, 3 Feb. 2023, https://www.investors.com/news/market-rally-powers-higher-on-tame-fed-meta-earnings-apple-google-amazon/

5. “Dow Jones Closes On A Whimper; Apple Rebounds After Earnings, iPhone Production Resumption” Investor’s Business Daily, 3 Feb. 2023, https://www.investors.com/market-trend/stock-market-today/dow-jones-falls-teslas-record-china-sales-meme-investor-cohen-buys-struggling-nordstrom/

6. “Stock market news live updates: Stocks wobble after jobs report shocks, Big Tech results disappoint” Yahoo News, 3 Feb. 2023, https://news.yahoo.com/stock-market-news-live-updates-february-3-2023-122332716.html

7. “US stocks close lower but still higher on the week” ForexLive, 3 Feb. 2023, https://www.forexlive.com/technical-analysis/us-stocks-close-lower-but-still-higher-on-the-week-20230203/

8. “S&P 500, Dow, Nasdaq slump as job gains raise Fed worries (SP500)” Seeking Alpha, 3 Feb. 2023, https://seekingalpha.com/news/3932039-sp-500-dow-nasdaq-slump-as-job-gains-raise-fed-worries