Federal Reserve interest rate cut expectations suddenly plummet!

On February 11th, local time, the three major U.S. stock indices closed slightly lower. The U.S. January non-farm employment data far exceeded expectations, indicating that the economic fundamentals remain solid, reducing the likelihood of the Federal Reserve cutting interest rates before mid-year.

The Dow Jones Industrial Average fell 66.74 points, or 0.13%, to 50,121.40; the Nasdaq declined 36.01 points, or 0.16%, to 23,066.47; the S&P 500 decreased by 0.34 points to 6,941.47.

U.S. Non-Farm Payrolls Unexpectedly Show Largest Increase in Over a Year, Traders Push Fed Rate Cut Expectations to July

The U.S. Bureau of Labor Statistics released the January non-farm employment report on Wednesday morning. The release was delayed due to the federal government partial shutdown that ended on February 3rd.

Data showed that U.S. non-farm employment increased by 130,000 jobs in January, well above expectations. The unemployment rate fell to 4.3%.

Previously, economists expected that the latest employment report would show little to no growth in January. A Dow Jones survey indicated that the market generally anticipated 55,000 new jobs, compared to 50,000 in December 2025. Economists also forecasted the unemployment rate to be around 4.4%. Additionally, traders will be watching a series of revisions from the Bureau of Labor Statistics, which could provide clues about the U.S. labor market and economic conditions.

The non-farm payroll report eased market negative sentiment triggered by weaker-than-expected consumer data on Tuesday. Tuesday’s data showed December consumer spending was flat month-over-month, below the 0.4% expected by Dow Jones economists.

The unexpectedly strong U.S. January non-farm employment data reduced the probability that the Federal Reserve would need to cut rates again before mid-year, as the most concerning aspects of the labor market seem to be fading.

Concerns about rising unemployment drove the Fed to cut rates three times in 2025 until a pause in January this year. However, the data released on Wednesday may have alleviated this situation. The new jobs added in January reached the highest in over a year, and the unemployment rate unexpectedly declined.

The latest data is likely to reinforce the Fed officials’ inclination to keep interest rates steady for now. Many traders quickly responded, pushing back their rate cut expectations from June to July.

At last month’s Federal Open Market Committee (FOMC) meeting, officials cited signs of stabilization as one reason to hold rates steady. When the Bureau of Labor Statistics report was released on Wednesday, traders immediately lowered the probability of a rate cut in June to below 50%. Just before the latest data was published, June was considered the most likely time for policy easing.

Economists warn that the optimistic January data could still be revised downward, and hiring remains concentrated in a few sectors, especially healthcare. After revisions last year, the average monthly new jobs were only 15,000, far below the initial figure of 49,000.

Alongside this surprising data, U.S. President Trump reiterated calls for rate cuts. After the non-farm report was released, Trump immediately posted on social media praising “excellent employment data.” He also stated that the U.S. should enjoy the lowest interest rates globally.

Trump previously announced the nomination of Kevin W. Warsh to succeed Jerome Powell as Fed Chair when his term ends in May. Warsh supports the view that rates can be further lowered.

Fed observers warn that it is premature to predict the economic outlook before June. If Warsh is confirmed earlier, his first FOMC meeting would be held at that time.

In addition to the employment report, other economic data that could impact the market will be released this week. The Consumer Price Index, a key indicator of inflation, is expected to be announced on Friday.

Bill Gates Says “Never Contacted Any Victims”

In terms of sectors, eight out of eleven sectors in the S&P 500 rose, while three declined. The energy sector and consumer staples led gains with increases of 2.59% and 1.40%, respectively. The financial and communication services sectors declined by 1.49% and 1.31%, respectively.

Large tech stocks had mixed performances. TSMC rose over 3%, Intel gained over 2%, ASML increased over 1%, while Nvidia, Tesla, Broadcom, Qualcomm, and Apple saw modest gains. Western Digital was flat, Meta declined slightly, Amazon and Oracle fell over 1%, Microsoft, Google A, and Boeing dropped over 2%, and Netflix fell over 3%.

Microsoft closed down 2.15%, with a trading volume of $16.655 billion. According to media reports, Bill Gates, chairman of the Gates Foundation, unexpectedly appeared in Zhangjiang, Shanghai, on the evening of February 11th to attend an event called “Action Creates Hope.” This was Gates’ first visit to China in about two and a half years since June 2023. In an interview, Gates addressed controversies surrounding his relationship with Epstein, clarifying, “Between 2011 and 2014, I did have dinner with Epstein a few times, but there’s nothing new to add about that. I have never contacted any victims, nor have I visited his island.”

Most financial stocks declined. Citigroup, Charles Schwab, Bank of New York Mellon, UBS, and Wells Fargo fell over 3%. Bank of America, U.S. Bancorp, American Express, First Capital Financial, and JPMorgan Chase declined over 2%. Deutsche Bank, Morgan Stanley, Mastercard, Goldman Sachs, and BlackRock saw slight declines, while Barclays remained flat. Regional banks saw slight gains, with MetLife, Mizuho Financial, and Hartford Insurance rising over 1%, and AIG up over 4%.

Most energy stocks rose. ExxonMobil, BP, and Shell gained over 4%, ConocoPhillips, Petrobras, and Schlumberger increased over 3%, Chevron, Apache, ExxonMobil, and Western Oil rose over 2%, while Devon Energy and Duke Energy gained over 1%. U.S. energy stocks declined slightly.

Popular Chinese concept stocks had mixed performances. The Nasdaq China Golden Dragon Index (HXC) fell 0.65%. Kingsoft Cloud rose over 9%, Bilibili and NIO gained over 2%, Li Auto and Xpeng increased over 1%. Ctrip, New Oriental, Tencent Music, and Vipshop saw modest gains, while JD.com, Tiger Securities, and Pinduoduo declined slightly. Alibaba and Baidu fell over 1%, iQiyi and Futu Holdings declined over 2%, NetEase dropped over 4%, and Huya fell over 5%.