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U.S. and global markets face caution on Friday due to another forecast miss, contributing to subdued stock performance at the market open. Long-dated Treasuries are keeping the yield curve at its flattest level this year.
Amazon joined the trend of disappointing Wall Street late Thursday on concerns about cloud computing, leading to a 4% stock decline overnight. The downward trend in forecasts by top U.S. tech firms is dampening the otherwise positive sentiment in the S&P500 index. Questions about heavy investments in artificial intelligence are resurfacing due to China's development of the budget-friendly DeepSeek model.
Meanwhile, Chinese stocks remain robust amid worries about escalating Sino-U.S. trade tensions and Beijing's impending retaliatory tariffs. The day's focal points are the release of the January U.S. employment report and revisions of past job creation figures.
Forecasted job growth for January is expected to have slowed to 170,000, affected by uncontrollable factors such as wildfires in California and harsh winter conditions nationwide. These anomalies complicate the overall job market analysis, including annual benchmark revisions and new adjustments.
Labor market reports for the week hint at a cooling trend, with job openings decreasing, lay-offs rising, and weekly jobless claims edging up. The Federal Reserve is monitoring these developments alongside President Trump's economic policies. The market anticipates two further interest rate cuts this year, while Treasury yields compress, reflecting a flat 2-to-10 year yield curve.
In global markets, central banks are consistently easing rates in response to concerns about weakening economies amidst trade tensions. The Treasury Secretary emphasizes a focus on reducing long-term rates rather than pressuring premature Fed actions. Other countries' currency manipulations are discouraged, aiming for a "strong dollar" policy.
The European Central Bank plans to disclose its updated estimation of the "neutral" interest rate, influencing decisions on potential rate cuts to stimulate the sluggish euro zone economy. The dollar index remains stable as markets await the impact of the U.S. employment report. European stocks pause near record highs amid ongoing earnings disclosures, with notable gains in the banking sector.
Key catalysts for U.S. markets later on Friday include the U.S. January employment report, European Central Bank's "R*" neutral interest rate update, along with speeches by Federal Reserve and Bank of England officials, and corporate earnings releases.