US stocks rallied by 1.94%, while international stocks fell by 1.04%. Bonds were flat.
The US added 517,000 jobs in January, way above estimates of less than 200,000, and in the process, dropped the unemployment rate to 3.4%, a 53-year low. Over the past year, wages were up by 4.4%, down from a revised 4.8% in December. The extra strong jobs report does not jive with other economic reports that show that consumer spending started to slow at the end of the year and that manufacturing activity declined. But new orders did increase, according to the Institute of Supply Management Business Activity Index, which increased to 60.4% from 45.2% in December. The Service Sector was also up, at 55.2 versus 49.2 in December.
The Fed raised its bench market interest rate to 4.75% from 4.5%. The strong jobs report led some investors to suspect that the Fed will continue for the time being on increasing rates and hold off cutting interest rates longer than expected.