Dow Jones Industrial Average backslides after NFP beat sours rate cut hopes

• The Dow Jones tumbled 700 points on Friday after NFP figures surged in December.
• Market bets for Fed rate cuts sank, rate traders now expect a single rate cut this year.
• Consumer sentiment and inflation expectations also rose, further hitting risk appetite.

The Dow Jones Industrial Average (DJIA) took a hard hit on Friday after investor sentiment soured on the back of a lofty Nonfarm Payrolls (NFP) jobs report, which showed a far higher rate of hiring than most investors anticipated. University of Michigan (UoM) consumer survey results also showed the average US spender expects more inflation rather than less over the next five years, further dampening risk appetite in equities as both strong jobs growth and high consumer inflation expectations bode poorly for more Federal Reserve (Fed) rate cuts.

US NFP net job additions in December rose to 256K, well above the expected 160K, while November’s print saw a slight downside revision to 212K. The UoM Consumer Sentiment Index fell to 73.2 in January, down from the previous month’s 74.0 and a steeper downturn than the expected 73.8. UoM 5-Year Consumer Inflation Expectations also rose to 3.3%, a notable step up from the previous print of 3.0%.