Wall Street rises to records after the unemployment rate improves

U.S. stocks reached new highs on Friday following the release of a mixed jobs report that painted a nuanced picture of the American labor market. The S&P 500 rose 0.6%, setting a fresh all-time high, while the Dow Jones Industrial Average added 237 points, or 0.5%, also reaching record territory. The tech-heavy Nasdaq composite led major indexes with a 0.8% gain.

The Labor Department reported that U.S. employers added fewer jobs in December than economists had anticipated, though the unemployment rate improved to better-than-expected levels. This data reinforces the notion that the U.S. job market may be in what analysts describe as a “low-hire, low-fire” state – a balance that could help the economy avoid a recession.

Power company Vistra emerged as one of the day’s standout performers, surging 10.5% after announcing a 20-year agreement to supply electricity from three of its nuclear plants to Meta Platforms. This deal represents part of a growing trend where technology giants secure long-term energy contracts to power data centers supporting their artificial intelligence initiatives.

In a similar vein, nuclear energy company Oklo jumped 7.9% after revealing its own partnership with Meta. The agreement will help Oklo secure nuclear fuel and advance development of a facility in Pike County, Ohio – further evidence of tech companies’ increasing investment in reliable energy sources for AI operations.

Homebuilders and companies in the housing sector rallied sharply following former President Donald Trump’s announcement of a plan to lower mortgage rates. The proposal calls for purchasing $200 billion in mortgage bonds, similar to previous Federal Reserve strategies to reduce borrowing costs. Builders FirstSource, a building products supplier, climbed 12%, while homebuilders Lennar, D.R. Horton, and PulteGroup saw gains of 8.9%, 7.8%, and 7.3%, respectively.

These gains helped offset a 2.7% decline in General Motors shares. The automaker disclosed it would take a substantial $6 billion hit to its fourth-quarter 2025 results related to its retreat from electric vehicles, following $1.6 billion in charges from the previous quarter. The company’s pullback reflects industry-wide challenges including reduced tax incentives and relaxed fuel-emission regulations, which have dampened consumer demand for EVs.

WD-40 shares tumbled 6.6% after reporting quarterly profits below analyst expectations. However, CFO Sara Hyzer attributed the disappointing numbers primarily to timing issues rather than weakening customer demand, and the company maintained its financial forecasts for the year ahead.

In the bond market, Treasury yields showed mixed movements. The 10-year Treasury yield eased to 4.16% from 4.19%, while the two-year yield, which more closely tracks Federal Reserve policy expectations, rose to 3.53% from 3.49%.

Friday’s jobs report has prompted traders to reduce expectations for an immediate interest rate cut at the Fed’s upcoming January meeting, with the probability now estimated at just 5%, down from 11% the previous day. Nevertheless, market participants still anticipate at least two rate cuts during 2024.

The stakes remain high for financial markets, as lower interest rates can stimulate economic growth and boost investment valuations, though potentially at the cost of exacerbating inflation. “Until the data provide a clearer direction, a divided Fed is likely to stay that way,” noted Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management. “Lower rates are likely coming this year, but the markets may have to be patient.”

A separate University of Michigan report showed strengthening consumer sentiment, particularly among lower-income households. Perhaps more significant for monetary policy considerations, the preliminary data indicated that expectations for inflation over the next 12 months might be at their lowest level in a year – potentially giving the Federal Reserve greater flexibility to reduce interest rates.

The optimism about both lower interest rates and economic resilience has recently benefited market segments beyond the dominant Big Tech and AI stocks that have led markets in recent years. The Russell 2000 index of smaller companies climbed 4.6% for the week, substantially outperforming the S&P 500’s 1.6% gain.

Internationally, European and Asian markets generally moved higher, with France’s CAC 40 rising 1.4% and Japan’s Nikkei 225 advancing 1.6%.