U.S. stocks faced a sharp decline on Friday, as a mixed jobs report and rising trade tensions weighed on investor sentiment. The Nasdaq Composite led the losses, tumbling 1.4%, while the Dow Jones Industrial Average dropped by 444.23 points, or 1%. The S&P 500 also slid 0.9%, with all three major indexes closing lower for the week.
The labor market showed signs of cooling, with the U.S. adding 143,000 jobs in January, below analysts’ expectations. However, the unemployment rate unexpectedly dipped to 4%, providing a silver lining. Despite the job growth, the lower-than-expected numbers raised concerns about the pace of economic expansion, especially as the Federal Reserve keeps a close eye on labor market health when making decisions on interest rates.
John Ingram, Chief Investment Officer at Crestwood Advisors, noted, “The overall takeaway is that the employment markets are still robust, consistent with an economy that seems to be accelerating.” Still, investors remained cautious, as the report failed to inspire confidence in an economy poised for a strong recovery.
Tariff Fears Intensify as Trade Tensions Escalate
Adding to the market’s unease, President Trump announced on Friday that the U.S. would impose reciprocal tariffs on unspecified countries next week. This announcement came during a meeting with Japanese Prime Minister Shigeru Ishiba and added to growing concerns about escalating trade wars. Analysts warned that new tariffs could exacerbate inflation, keeping the Federal Reserve’s long-awaited interest rate cuts further out of reach.
Earlier in the week, markets had already been rattled by Trump’s aggressive tariff moves on China, Mexico, and Canada. Although the U.S. struck deals with Mexico and Canada to delay tariffs, U.S. tariffs on Chinese imports were implemented this week, sparking retaliatory actions from Beijing. This intensifying trade conflict between the world’s two largest economies has heightened fears of a prolonged trade war.
Jennifer Appel, Senior Investment Director at investment consulting firm NEPC, advised caution in response to the volatility. “There’s just been so much noise,” said Appel. “If investors try to get too cute with their portfolios or how they’re thinking about things, they might be making the wrong calls.”
Tech Stocks Struggle Amid AI Spending and Uncertainty
In the tech sector, Amazon’s stock fell 4% on Friday after the company issued a disappointing forecast, alongside its commitment to heavy AI-related capital expenditures. Amazon’s struggles mirrored those of other major tech giants, including Microsoft, Google, and Meta Platforms, all of which are significantly increasing their AI investments.
The broader tech sector saw broad declines, with Tesla, Apple, and Alphabet all posting losses. However, Nvidia bucked the trend, gaining 8.1% after a difficult week, buoyed by renewed interest in its role in the AI space. Meta, on the other hand, continued its upward trajectory, rising for the 15th consecutive session.
Other Market Movements and Global Developments
Treasury yields saw an uptick, as traders reduced expectations for rate cuts from the Fed. The benchmark 10-year yield settled at 4.483%, down slightly from 4.566% the previous week.
In commodities, gold futures saw strong gains, with the most actively traded contract closing at $2,887.60 per ounce, after briefly hitting an all-time high earlier in the day.
In global markets, Chinese tech stocks surged in Hong Kong, entering a new bull market, thanks to the rise of DeepSeek, a Chinese AI company. Major Chinese tech players like Lenovo, Xiaomi, and Alibaba saw significant gains, further fueling optimism in the sector.
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