The S&P 500 ended Friday slightly higher, but all three major averages ended a nine-week winning streak following a stronger-than-expected jobs report.
The broader index rose 0.18%, while the Nasdaq Composite gained 0.09%. The Dow Jones Industrial Average rose 25.77 points, or 0.07%.
The three major averages posted their first negative week in a decade, with the Nasdaq suffering the largest decline of 3.25% – its worst weekly performance since September. The S&P 500 and the Dow fell 1.52% and 0.59%, respectively.
Stock markets fluctuated on Friday as traders evaluated incoming economic data to determine if and when the Federal Reserve will begin cutting interest rates.
The U.S. economy added many more jobs than expected in December, with nonfarm payrolls rising by 216,000. Economists polled by Dow Jones expected a gain of 170,000 last month. The unemployment rate remained steady at 3.7%, another sign of continued labor force strength.
The report sent Treasury yields soaring, with the benchmark 10-year Treasury rate hitting a high of 4.103%.
A strong labor market could mean the Fed may delay the first of its rate cuts that traders have been eagerly awaiting. Before the strong data arrived on Friday, traders were hoping the Fed would start cutting rates as early as March and cut them by up to six times in 2024. These expectations must be withdrawn.
While December's ISM services index suggested business activity in the economy as a whole was still increasing, the 50.6% reading was nearly two full percentage points below the Dow Jones consensus estimate of 52.5% and November levels of 52.7%. A value above 40% marks the threshold for economic growth.
“The job market is looking good — maybe too good — and maybe inflation will be a little higher now because of the wage growth that we're seeing,” Mike Bailey, director of research at FBB Capital Partners, told CNBC. “This crackdown we’re seeing in the labor market could put some damper on hopes for a quick series of rate cuts.”
He added: “Today investors wanted three things: easing inflation, a stable labor market and interest rate cuts. However, I think today's employment number suggests to me that there is a give and take here and investors could also get one of the three items on their wish list.
The stock market rose sharply through the end of 2023 as traders expected the Fed to move toward looser monetary policy. The S&P 500's weekly year-end winning streak was its longest in nearly two decades, bringing the benchmark's annual gain to 24%.
Another factor weighing on the market in the new year is the slowdown in large-cap technology stocks such as Apple, which was downgraded by two research firms this week.