📉 WALL STREET SLIPS AS SURPRISE JOBS SURGE DERAILS FED RATE-CUT TIMELINE

What happened: U.S. stocks closed modestly lower on Wednesday after the January employment report landed far hotter than expected, forcing traders to aggressively unwind bets on early Federal Reserve rate cuts .

The numbers:

Dow Jones: ▼0.13% (50,121.4)
S&P 500: ▼0.00% (6,941.47) – effectively flat
Nasdaq: ▼0.16% (23,066.47)

The catalyst: The U.S. added 130,000 jobs in January—nearly double the 70,000 economists had forecast. The unemployment rate ticked down to 4.3%, and average hourly earnings rose 0.4% for the month .

Market reaction (textbook): Bond yields jumped immediately. The 10-year Treasury yield climbed to 4.17% , its highest level in weeks . The CME FedWatch Tool showed the probability of the Fed holding rates steady through June surge to 41.2% , up from just 24.8% the previous day—a 16.4 percentage point swing in 24 hours .

What this means for rates:

March meeting: 94% probability of no move (up from ~80%)
June meeting: Odds of a hold now 41%; odds of a 25bp cut 48%
2026 total: Markets have slashed expectations from three cuts to just two for the full year

The strategist take:

“This is generally a good sign, as you’d expect, but we are certainly not out of the woods yet. ‘Moving in the right direction’ would be a better description.”
— Rick Wedell, CIO, RFG Advisory

“In the absence of a clear and sustained deceleration in inflation ahead, incoming Fed Chair Kevin Warsh will likely face challenges in persuading the FOMC to adopt a more dovish stance.”
— Seema Shah, Chief Global Strategist, Principal Asset Management

⚠️ THE REVISION EVERYONE IS TALKING ABOUT

The catch: January’s headline strength masks a stunningly weak 2025.

The Labor Department’s annual benchmark revisions revealed that 2025 job growth was slashed from 584,000 to just 181,000—a 69% downward revision. Average monthly job growth last year was barely 15,000, a pace more typical of recession than expansion .

The interpretation divide:

Productivity optimists: Some economists argue the combination of strong GDP growth (4.4% annualized in Q3) and weak hiring suggests an AI-driven productivity boom. Firms are producing more with fewer workers .
Slowdown hawks: Fed Governor Christopher Waller has warned the labor market in 2025 was weaker than widely appreciated and could deteriorate further. The current “low-hiring, low-layoff” equilibrium may not persist .

Real-time warning sign: Arirang TV reports that a metric tracking “lost pay and income”—previously concentrated among lower-income groups—has spread to high-income households in 2026. Economists call this a “ringing alarm bell” for the K-shaped economy .

🏛️ BUDGET DEFICIT: TARIFF REVENUE SURGES, BUT LONG-TERM OUTLOOK DARKENS

Good news (short term): The U.S. Treasury reported that the federal budget deficit for the first four months of fiscal 2026 shrank to $697 billion, down 17% from $840 billion in the same period last year .

Why: Tariff revenue has exploded.

Total tariff revenue this fiscal year-to-date: $124 billion (up more than 300% year-over-year)
Just in January: $30 billion in tariff revenue (up 275% year-over-year)

President Trump touted the numbers, claiming his tariff policies have reduced the trade deficit by 78% and predicting the U.S. will run a trade surplus next year .

Bad news (long term): The Congressional Budget Office (CBO) is not impressed. It now projects the 2026 fiscal year deficit at nearly $1.9 trillion—and warns it will balloon to $3.1 trillion by 2036. The CBO raised its 10-year deficit forecast by $1.4 trillion, citing Trump’s 2025 tax cuts and immigration policies .

🪙 COMMODITIES: GOLD SURGES, OIL JUMPS, NICKEL SPIKES

Gold: Spot gold jumped 1.17% to $5,084.53/oz, after touching an intraday high of $5,119.30. COMEX futures hit $5,107.80 .

Silver: Even stronger—up 4.35% to $84.3115/oz .

Oil:

WTI crude: ▲1.05% ($64.63/barrel)
Brent: ▲0.87% ($69.40/barrel)

Prices surged despite a massive inventory build. U.S. crude stockpiles jumped 850,000 barrels last week—far exceeding the 80,000 forecast—hitting 428.8 million barrels, the highest one-week build in a year .

Nickel: London Metal Exchange nickel surged 2.55% to $18,002.38/ton after Indonesia signaled sharp cuts to its 2026 nickel ore production quotas .

🌍 GLOBAL MARKETS: MIXED

Asia-Pacific: Mostly higher. Japan closed for holiday; Shanghai +0.1%, Hang Seng +0.3% .

Europe: Mixed. FTSE 100 ▲1.1%, CAC 40 ▼0.2%, DAX ▼0.5% .

Forex: U.S. Dollar Index edged up 0.07% to 96.92. Dollar weakened slightly against yen (▼0.73% to 153.27) but firmed against euro .

📅 WHAT’S NEXT

All eyes now shift to Friday’s U.S. inflation report (CPI) . The January jobs data has already reset rate expectations; if inflation comes in hot, the “no cut through June” probability will spike further, and the two 2026 cuts currently priced may evaporate entirely .

Also today:

21:30 ET: Weekly initial jobless claims
23:00 ET: January existing home sales
IEA monthly oil market report