US equity indexes experienced a significant decline in midday trading on Friday, driven by stronger-than-expected nonfarm payroll figures and escalating inflation expectations, which led to an increase in government bond yields. The S&P 500 index fell by 1.6%, closing at 5,826.1, while the Nasdaq Composite dropped 1.9% to settle at 19,117.2.
The Dow Jones Industrial Average also saw a decrease of 1.6%, closing at 41,972.3. All sectors traded in negative territory during the intraday session, with technology and consumer discretionary sectors emerging as the most significant decliners. The December employment report highlighted a robust increase in nonfarm payrolls, which rose by 256,000 jobs, surpassing the anticipated rise of 165,000 according to a Bloomberg survey conducted by the US Bureau of Labor Statistics.
Notably, November's employment figures underwent a downward revision to a 212,000 increase, while October's numbers were adjusted upwards, resulting in a net downward revision of 8,000 jobs for the previous months. The unemployment rate saw a small decrease, falling to 4.1% in December from 4.2% in November, defying expectations of remaining unchanged at 4.2%.
Hourly earnings reported a modest increase of 0.3% for the month, matching forecasts, after a slightly higher 0.4% rise in November. Year-over-year, hourly earnings rose by 3.9%, reflecting a deceleration compared to the 4% pace in November. Intraday, US Treasury yields moved upwards, with the 10-year Treasury yield rising by six basis points to 4.74%, while the two-year yield surged 11.1 basis points to 4.37%.
In concurrent economic reports, the University of Michigan's preliminary consumer sentiment index dipped to 73.2 in January from 74.0 in December, contrary to expectations of stability. Respondents highlighted an increase in one-year inflation expectations to 3.3%, a significant rise from December's 2.8%, marking the highest levels observed since May 2024.
Furthermore, five-year inflation expectations also escalated, moving from 3% to 3.3%. In the corporate sector, Walgreens Boots Alliance ($WBA) shares surged by 25% during intraday trading, positioning the company as the top performer on the S&P 500, following the release of fiscal Q1 results that exceeded analysts' predictions, showcasing a year-over-year revenue increase.
Meanwhile, Constellation Energy ($CEG) announced its acquisition of the privately-held energy company Calpine, in a cash-and-stock deal valued at a net price of $26.6 billion, inclusive of debt obligations. This news propelled its shares up nearly 25% intraday, making it one of the key gainers on both the S&P 500 and Nasdaq indices.
Additionally, West Texas Intermediate crude oil futures climbed 3.5%, reaching $76.52 a barrel..