News

Good news is bad news—at least for today. Stocks dropped and bond yields spiked to their highest levels since 2023 after the Bureau of Labor Statistics (BLS) reported much stronger-than-expected jobs numbers Friday.

Employers added 256,000 workers to their payrolls in December, according to the BLS, which was much higher than the 165,000 economists were expecting.

The unemployment rate ticked lower, to 4.1% from 4.2%, compared to the unchanged reading economists expected.

Yields Hit Highest Levels Since 2023

Bond yields, which had already been on an upward trajectory over the past four months, reached new heights following the release of the jobs data.

The 10-year Treasury bond yield rose as much as 10 basis points to 4.79%, its richest level since late 2023, when the yield peaked at around 5%.

Likewise, the 30-year Treasury bond yield climbed as much as 7 basis points to 5%, putting it just 10 basis points off its high from 2023.

Exchange-traded funds that track Treasury bonds, like the iShares 20+ Year Treasury Bond ETF (TLT) , tumbled (bond yields and prices move inversely). TLT fell by 1% at its lows, bringing its year-to-date losses to more than 2%. The ETF declined more than 8% in 2024.

The retrenchment in bonds reflects stronger growth prospects for the U.S. economy and diminishing odds of a substantial rate cut by the Federal Reserve this year. The CME FedWatch tool suggests that the U.S. central bank might cut rates only just once in 2025.

Stocks Falter

Bonds weren’t the only asset class to struggle Friday following the higher-than-expected jobs numbers. The SPDR S&P 500 ETF Trust (SPY) and the Invesco QQQ Trust (QQQ) dropped 1.9% and 2.2%, respectively, at their lows.

At its low of the day, the S&P 500 was down 4.6% from its all-time closing high in December, while the Nasdaq-100 fell by 6.2%.

SPY and QQQ each returned around 25% in 2024 after surging 26% and 55%, respectively, in 2023.

Bulls vs. Bears

After back-to-back years of enormous gains, some investors are worried that stocks could be due for a pullback, particularly since valuations for U.S. stocks are historically rich. Perhaps high interest rates could be the catalyst that sparks the next stock market correction.

On the other hand, while rising rates are a concern for investors, as long as the economy and corporate profits continue to grow, investors may look past the jump in yields.

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