Job Growth Disappoints in January, Despite Lower Unemployment

March S&P 500 E-Mini futures (ESH25) are trending down -0.20% this morning after the January jobs report was released. January's job growth fell short of expectations, according to the Bureau of Labor Statistics report released Friday. Only 143,000 nonfarm payrolls were added, a decrease from December's revised 307,000 and below the anticipated 169,000. Despite this, the unemployment rate edged down to 4%.

Amazon.com (AMZN) fell over -2% in pre-market trading after the e-commerce and cloud services giant provided below-consensus Q1 revenue guidance.

In yesterday’s trading session, Wall Street’s major indices closed mixed. Tapestry (TPR) surged over +12% and was the top percentage gainer on the S&P 500 after reporting better-than-expected FQ2 results and raising its full-year adjusted EPS guidance. Also, Philip Morris International (PM) climbed more than +10% after the company posted upbeat Q4 results and gave a solid FY25 adjusted EPS forecast. In addition, Ralph Lauren (RL) gained over +9% after raising its full-year revenue growth guidance. On the bearish side, Skyworks Solutions (SWKS) tumbled over -24% and was the top percentage loser on the S&P 500 after the semiconductor company said it anticipates a 20% to 25% reduction in its share of the business supplying radio frequency components to Apple, its largest customer.

The Labor Department’s report on Thursday showed that the number of Americans filing for initial jobless claims in the past week rose by +11K to 219K, compared with the 214K expected. Also, U.S. Q4 nonfarm productivity increased +1.2% q/q, missing the +1.5% q/q consensus, while unit labor costs rose +3.0% q/q, weaker than expectations of +3.4% q/q. 

“So far, this week’s numbers have highlighted a labor market that doesn’t appear to be doing much hiring or firing,” said Chris Larkin at E*Trade from Morgan Stanley.

Dallas Fed President Lorie Logan stated on Thursday that interest rates may already be close to a neutral level, possibly reducing the necessity for further cuts even if inflation continues to ease. 

Meanwhile, U.S. rate futures have priced in an 85.5% chance of no rate change and a 14.5% chance of a 25 basis point rate cut at the March FOMC meeting.

Today, all eyes are focused on the U.S. monthly payroll report, which is set to be released in a couple of hours. Economists, on average, forecast that January Nonfarm Payrolls will come in at 169K, compared to December’s figure of 256K.

“[Today’s] jobs report is important for markets because if it’s Goldilocks, it’s going to help support the market amidst all this tariff and policy noise,” said Tom Essaye at The Sevens Report. “However, if it’s not Goldilocks, it’s going to add another headwind on risk assets and likely pressure stocks.”

A survey conducted by 22V Research showed that only 24% of respondents expect key U.S. jobs data to be “risk-on,” 30% foresee “risk-off,” and 46% anticipate it will be “mixed/negligible.”

Market watchers will also be closely following a revision to job growth. Each year, the Bureau of Labor Statistics’ January employment report includes revisions for the 12 months through the preceding March. Typically, those retrospective adjustments to the data don’t attract much attention. However, this time they will, because the agency’s preliminary estimate in August indicated that the downward revision would be 818,000, the biggest since 2009. Economists anticipate the actual markdown in the January report will likely total around 600,000 to 700,000 jobs, offering some relief.

U.S. Average Hourly Earnings data will be in focus today. Economists expect January figures to be +0.3% m/m and +3.8% y/y, compared to the previous numbers of +0.3% m/m and +3.9% y/y.

The U.S. Unemployment Rate will be reported today. Economists forecast that this figure will remain steady at 4.1% in January.

The University of Michigan’s U.S. Consumer Sentiment Index will come in today. Economists anticipate that the preliminary February figure will be 71.9, compared to 71.1 in January.

U.S. Consumer Credit data will be released today as well. Economists expect this figure to be $17.70B in December, compared to the previous figure of -$7.49B.

In addition, market participants will be looking toward speeches from Fed Governors Michelle Bowman and Adriana Kugler.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.433%, down -0.11%.

The Euro Stoxx 50 Index is down -0.32% this morning as investors booked profits following a recent rally and cautiously awaited the key U.S. jobs report later in the day. Healthcare and automobile stocks underperformed on Friday, while construction stocks gained ground. Still, the benchmark index is on track for a solid weekly gain as strong quarterly earnings overshadow worries about a global trade war. Data from the Federal Statistics Office released on Friday showed that German exports unexpectedly rose to an 8-month high in December, while imports also rose more than expected. Separately, data showed that Germany’s industrial production fell more than expected in December, led by a drop in car industry output, adding to concerns for the struggling sector as it faces the threat of U.S. tariffs. Meanwhile, European Central Bank Chief Economist Philip Lane stated on Friday that the central bank would closely examine economic data when determining the extent of rate cuts rather than focusing heavily on the so-called neutral rate often cited as a benchmark. In corporate news, L’Oreal (OR.FP) fell over -2% after reporting the slowest quarterly sales growth since the pandemic. At the same time, Danske Bank A/S (DANSK.C.DX) climbed more than +7% after Denmark’s biggest lender posted record annual profits and announced a new share buyback program. 

Germany’s Exports, Germany’s Imports, and Germany’s Industrial Production data were released today.

The German December Exports stood at +2.9% m/m, stronger than expectations of -0.6% m/m.

The German December Imports arrived at +2.1% m/m, stronger than expectations of +1.8% m/m.

The German December Industrial Production came in at -2.4% m/m, weaker than expectations of -0.7% m/m.

Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed up +1.01%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.72%.

China’s Shanghai Composite Index closed higher today. AI-related stocks continued to rise on Friday, fueled by enthusiasm over Chinese AI startup DeepSeek’s breakthrough. “DeepSeek a re-rating catalyst. The development of DeepSeek has attracted the attention of global markets - it reconfirmed China’s continued ability to innovate,” HSBC analysts said. Automobile and real estate stocks also gained ground. The benchmark index posted gains for the week. Meanwhile, investors are closely monitoring tariff developments between the U.S. and China. Beijing’s response to the 10% tariffs imposed by the Trump administration on Chinese goods was viewed as restrained, alleviating fears of a global trade war. China’s foreign ministry spokesperson Lin Jian urged dialogue “based on equality and mutual respect” between China and the U.S. following the implementation of U.S. tariffs on Chinese goods. U.S. President Donald Trump and Chinese leader Xi Jinping are expected to speak soon, though the exact timing of the conversation remains uncertain. Investors are also awaiting China’s consumer and producer inflation data for January, scheduled for release on Sunday. In corporate news, BYD climbed over +5%, extending yesterday’s gains after reports emerged that it will unveil its advanced intelligent driving system at an event on February 10th. Also, China Vanke rose more than +5% as investor confidence grew following management changes at the company.

Japan’s Nikkei 225 Stock Index closed lower today, snapping a 3-day winning streak as concerns about higher borrowing costs dampened sentiment. Automobile and real estate stocks led the declines on Friday. The benchmark index posted a weekly loss. Data from the Internal Affairs Ministry released on Friday showed that Japanese annual household spending rebounded more strongly than expected in December, marking the first increase since July. Separately, preliminary data from the Cabinet Office showed that Japan’s leading economic indicators index, which gauges the economic outlook for a few months ahead based on data such as job offers and consumer sentiment, rose in December. The latest economic data from Japan bolstered a hawkish view on the Bank of Japan’s monetary policy. Meanwhile, Japan’s government bond yields hit new multi-year highs on Friday amid expectations that the BOJ might hike interest rates earlier than the market had expected. BOJ board member Naoki Tamura stated on Thursday that the central bank should raise short-term interest rates to at least 1% by the second half of fiscal 2025 “to reduce upside risk to prices and achieve the price stability target in a sustainable and stable manner.” In other news, Japanese Prime Minister Shigeru Ishiba is set to meet with U.S. President Donald Trump on Friday. In corporate news, Tokyo Electron slid over -4% despite reporting a 50.7% year-over-year increase in operating income for the third quarter. Also, Nikon Corp. plunged more than -9% after the camera maker cut its full-year operating profit forecast. At the same time, Mercari soared about +21% after the flea market app operator reported better-than-expected operating profit for the December quarter. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed up +0.28% to 21.69.

The Japanese December Household Spending stood at +2.3% m/m and +2.7% y/y, stronger than expectations of -0.5% m/m and +0.2% y/y.

The Japanese December Leading Index came in at 108.9, stronger than expectations of 108.2.

Pre-Market U.S. Stock Movers

Amazon.com (AMZN) fell over -2% in pre-market trading after the e-commerce and cloud services giant provided below-consensus Q1 revenue guidance.

Pinterest (PINS) jumped more than +21% in pre-market trading after the company gave a strong Q1 revenue forecast. 

e.l.f. Beauty (ELF) plummeted over -27% in pre-market trading after the cosmetics company cut its full-year guidance. 

Affirm Holdings (AFRM) surged more than +15% in pre-market trading after the company posted stronger-than-expected FQ2 results and boosted its FY25 GMV guidance. 

Cloudflare (NET) climbed over +10% in pre-market trading after reporting better-than-expected Q4 results. 

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Friday - February 7th

Fortive (FTV), Cboe Global (CBOE), Banco Bradesco (BBD), Kimco Realty (KIM), Avantor (AVTR), Plains All American Pipeline (PAA), Plains GP Holdings (PAGP), Construction Partners (ROAD), Flowers Foods (FLO), Newell Brands (NWL), Perella Weinberg Partners (PWP), Frontier Group Holdings (ULCC), Proto Labs (PRLB), Amark Preci (AMRK), Byrna Technologies (BYRN), Green Plains Energy (GPRE), Graham (GHM), GrafTech (EAF), Canopy Growth (CGC), Iterum Therapeutics (ITRM).