Friday is going to be a high-stakes day for the markets, with a crucial employment update and a speech by Federal Reserve Chair Jerome Powell scheduled for midday.
The February jobs report comes after worries about the economic impact of an intensifying trade war and a significant decline in consumer confidence at the beginning of President Donald Trump’s second term.
Although concrete evidence has not yet indicated economic weakness, investors have been on the lookout for possible repercussions due to concerning survey data, the Trump administration’s trade tariffs, Elon Musk’s “DOGE” team’s efforts to drastically reduce the size of the federal government, and congressional Republicans’ efforts to find money for tax cuts.
The jobs report may provide another piece of the economic puzzle, according to John Velis, Americas macroeconomic analyst at BNY Mellon. “We like to call it a five-point-harness day,” he said. According to him, it can also “freak people out” if it performs worse than expected.
Wall Street predicts that unemployment will remain at 4% in February and that 170,000 new jobs will be added. Trump’s federal employment losses are not yet anticipated to be reflected in that reading.
Shock to stocks
Following any shocks in economic statistics, as well as when Powell discussed the expected trajectory of interest rates in reaction to inflation and the job market, stocks have been prone to significant fluctuations. Even before the topic of growth worries was brought up again, it was the case.
According to Andrew Husby, senior U.S. economist at BNP Paribas, “the jobs data are going to be a key test of the economy’s resilience here,” He anticipates that the unemployment rate will be stable for the time being, but there is a chance that bad sentiment may spread quickly and force corporate plans to be scaled back.
The “Fed might have to do something to support growth,” Husby stated, in that case.
Trump’s trade war has caused market turbulence, with concerns growing that what was first described as a means of protecting American borders from illegal immigration and fentanyl could turn out to be a costly one for businesses, people, and the American economy.
Concerns about growth caused the 10-year Treasury yield, BX:TMUBMUSD10Y, to drop precipitously from its peak of 4.8%, but it rose up to 4.28% on Thursday.
After automakers were given a temporary reprieve from the proposed 25% tariffs, stocks surged on Wednesday. In addition to potentially hurting China, Canada, and Mexico, those taxes run the risk of severely damaging America’s industrial base and depressing the country’s economy.
Stocks fell precipitously on Thursday, pushing the Nasdaq Composite index COMP closer to correction territory despite fresh tariff exemptions for Mexican products. According to Dow Jones Market Data, a close below 18,156.50 for the tech-heavy index would solidify a correction by signifying a decline of at least 10% from its previous record high. As of Thursday, the Nasdaq was down 5% year-to-date.
The Roundhill Magnificent Seven exchange-traded fund (MAGS), which follows a well-liked collection of megacap technology businesses, was moving further into correction zone, while the S&P 500 index (SPX) was down 2.8% thus far in 2025. As of the last review, the Dow Jones Industrial Average DJIA was down 0.3% for the year.
Given Trump’s campaign pledges of tax cuts and other “pro-growth” measures, Wall Street had not anticipated that. Instead, tariffs, a growth scare, and the government’s shrinkage under Musk marked the beginning of his second term.
A world in order
The first comprehensive monthly jobs report of Trump’s second term will be released on Friday. The United States has strained long-standing military and economic ties and pressured Ukraine to give up its mineral wealth in exchange for a peace agreement with Moscow in the weeks since his inauguration.
After discussions between Trump and officials from Ford Motor Company (F), General Motors Co. (GM), and Stellantis (STLA), a one-month halt on 25% tariffs on autos entering the U.S. from Canada and Mexico gave stocks a small reprieve on Wednesday.
However, retaliatory actions had already been declared in Canada. Premier Doug Ford of Ontario said his province was also “ripping up” a $100 million contract with Musk’s Starlink satellite internet company and prohibiting all American businesses from receiving government contracts. Additionally, wine, beer, and spirits from the United States were prohibited in Ontario and a number of other Canadian provinces.
According to Velis of BNY, investors have been eschewing the Canadian dollar, and market sentiment has soured. According to him, demand for Treasurys in the 7- to 10-year range has decreased among international buyers, and the situation has gotten worse since early December, which is concerning for the United States and its massive deficit.
“That’s going to be a problem if it doesn’t turn around,” he stated.
