US STOCKS-Wall Street ends muted after strong jobs data nibbles at Fed rate cut bets

Wall Street's three main indexes had started the session on a strong ‌note, with the S&P 500 and the Nasdaq hitting their highest level in more than a week after the closely watched payrolls report showed much faster than expected U.S. job growth in January while the unemployment rate fell to 4.3%. However, gains subsided as traders dialed back on bets for rate cuts.

The Nasdaq and the Dow fell slightly on Wednesday, while the S&P 500 made no progress in either direction as a stronger-than-expected employment report eased worries about the economy but also fueled bets that the Federal Reserve could slow its interest-rate cuts. Wall Street's three main indexes had started the session on a strong ‌note, with the S&P 500 and the Nasdaq hitting their highest level in more than a week after the closely watched payrolls report showed much faster than expected U.S. job growth in January while the unemployment rate fell to 4.3%.

However, gains subsided as traders dialed back on bets for rate cuts. While traders are still banking on at least one 25-basis-point cut in June, the probability that rates would hold steady that month crept up ‌to 41% from 24.8%, according to the latest data from CME Group's FedWatch tool. Julia Hermann, global market strategist at New York Life Investments, said that investors digested changes to rate cut bets "quite well" because they ‌interpreted the strong jobs report as good news for the economy.

"This is constructive news in that the economy is not in dire need of rate cuts because the jobs market has been showing some new signs of life," she said. "It comes down to the sweet spot of hiring being strong enough to show us the economy is resilient but not so strong as to derail expectations for future Fed easing." Investors will next turn their attention to the January Consumer Price Index (CPI) inflation report, which is due out on Friday. The Dow ⁠Jones Industrial Average ​fell 66.74 points, or 0.13%, to 50,121.40, the S&P 500 ⁠lost 0.34 points to finish at 6,941.47 and the Nasdaq Composite lost 36.01 points, or 0.16%, to 23,066.47. The Dow's biggest percentage decliner was International Business Machines. It's biggest gainer was Caterpillar, which rose 4.4% after Argus Research sharply raised its price target for the stock ⁠to $820 from $625. Among the S&P 500's 11 major industry sectors, eight gained ground. Financial services and communications services both finished down more than 1% while energy led gains with a 2.6% rally followed by defensive consumer staples, which rose 1.4%. Technology was a mixed ​bag with chip stocks rallying sharply and software stocks tumbling to snap three sessions of gains after last week's steep selloff fueled by fears of AI-fueled disruption. The Philadelphia semiconductor index rallied 2.3%, while ⁠the S&P 500 software index finished down 2.6%. Software giant Microsoft lost 2.2% and was the biggest drag on the S&P 500 followed by Alphabet, which was off 2.4% and weighed heavily on the communications services index.

Brokerage firms that already fell on Tuesday after startup Altruist announced AI-enabled ⁠tax-planning ​features extended their declines on Wednesday with Charles Schwab, and Ameriprise Financial falling more than 3% while LPL Financial lost 6%. The rate-sensitive S&P 500 bank index finished down 2.6%. Robinhood shares tumbled 8.9%, leading declines in the financial services index, after the retail brokerage missed fourth-quarter revenue expectations. Generac shares rallied 17.9%, making it the S&P 500's biggest percentage gainer, after its fourth-quarter results. Humana shares fell 3.3% after the health insurer forecast 2026 profit below Wall ⁠Street estimates. Moderna shares dropped 3.5% after the U.S. Food and Drug Administration decided not to review the company's application for approval of its influenza vaccine. Advancing issues outnumbered decliners by a 1.13-to-1 ratio on the NYSE where ⁠there were 884 new highs and 147 new ⁠lows. On the Nasdaq, 1,826 stocks rose and 2,937 fell as declining issues outnumbered advancers by a 1.61-to-1 ratio. The S&P 500 posted 99 new 52-week highs and 24 new lows while the Nasdaq Composite recorded 123 new highs and 232 new lows. On the volume front, 20.86 billion shares changed hands on U.S. exchanges compared ‌with the 20.79 billion moving average ‌for the last 20 sessions.

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