Weekly Market Recap: Markets Wobble as Job Growth Cools & Trade Tensions Rise – What’s Next for Investors?

Market Overview 

U.S. equities faced a turbulent week, with all major indexes closing lower as tariff developments dominated headlines. The S&P 500 lost 0.23%, the Dow Jones Industrial Average shed 0.54%, and the Nasdaq declined by 0.53%. Value stocks marginally outperformed growth, while small caps dropped 0.33%. Emerging markets provided a bright spot, rising 1.40%, buoyed by stronger inflows and renewed interest in consumer sectors. 

Internationally, European stocks set fresh record highs, supported by robust corporate earnings and another rate cut by the Bank of England. Asian markets saw mixed performance, with China rallying upon reopening after the Lunar New Year holiday, while Japan struggled due to currency fluctuations and trade uncertainties. 

Fixed-income markets reflected heightened volatility as the 10-year Treasury yield fell four basis points to 4.49%, while short-term yields rose amid delayed expectations for Federal Reserve rate cuts. Commodities were mixed; crude oil prices dropped on concerns over U.S.-China trade tensions, while gold marked its sixth consecutive weekly gain, driven by safe-haven demand and growing interest from Chinese investors. 

Federal Reserve Insights and Economic Roundup 

January’s jobs report revealed signs of a cooling labor market, raising questions about the sustainability of economic growth. Employers added just 143,000 new jobs last month, significantly below the 12-month average of 200,000. Job growth was concentrated in healthcare and retail trade, while declines were noted in mining and oil/gas extraction. The unemployment rate edged down to 4.0%, but the dip was attributed to changes in labor force participation rather than robust hiring. 

Revised data revealed that job growth in 2024 was softer than originally reported, with December figures adjusted downward. Long-term unemployment remains low, but the average workweek for all employees on private nonfarm payrolls fell by 0.1 hour to 34.1 hours in January, signaling potential headwinds for worker productivity. These trends reflect a labor market that, while resilient, is showing signs of deceleration under the weight of trade tensions and slowing global growth. 

The manufacturing sector offered a glimmer of hope, with ISM data indicating expansion for the first time since October 2022. However, rising input costs tempered enthusiasm. Consumer spending has also slowed, with retail and discretionary sectors showing weakness heading into February, though inflationary pressures are expected to moderate in the coming months.

The Week Ahead 

Investors will focus on key inflation metrics and consumer data in the coming week. Major reports include: 

Monday: New York Fed One-Year Inflation Expectations (Jan). 

Tuesday: NFIB Small Business Optimism Index (Jan). 

Wednesday: Annual CPI Revisions, Consumer Price Index (CPI) (Jan), Real Average Weekly and Hourly Earnings (Jan), Federal Budget Balance (Jan). 

Thursday: Annual PPI Revisions, Producer Price Index (PPI) (Jan), Initial and Continuing Jobless Claims. 

Friday: Retail Sales (Jan), Import/Export Price Index (Jan), Industrial Production (Jan), Capacity Utilization (Jan), Manufacturing Production (Jan), Business Inventories (Dec). 

Market participants will closely watch CPI and PPI figures to gauge inflation trends and their implications for future Federal Reserve actions.