Non-farm payroll data released: The US market enters a critical policy period

Non-farm employment data release, although market expectations have adjusted somewhat, overall remain in a state of high uncertainty. As several major events unfold step by step, mid-January to the end of the month becomes a critical period for determining market direction. The employment data for that month showed weak non-farm payroll growth, with only 50,000 new jobs, far below expectations, while the unemployment rate unexpectedly dropped to 4.4%. Behind these seemingly contradictory figures lies the complex dynamics of the U.S. economy.

Non-farm Payroll Report Sparks Market Volatility

The release of non-farm employment data showed that the number of new jobs added that month was well below expectations, and data from October to November was also significantly revised downward. This immediately shattered market expectations of a Fed rate cut in January, with the probability of a 25 basis point cut dropping from expectations to just 5%. Subsequently, the market adjusted its outlook for future rate cuts, pushing the first cut to mid-year.

Inflation expectations also saw a notable adjustment. The inflation forecast for the next year fell to the lowest since January 2025 at 4.2%, while long-term inflation expectations slightly increased to 3.4%. This reshaping of expectations reflects the market’s reassessment of economic growth momentum and sets the stage for future policy changes.

Earnings Season Focuses on Financial and Tech Companies

As mid-January approaches, major U.S. banks are set to begin their Q4 2025 earnings release cycle. JPMorgan Chase is scheduled to report around January 13, followed by Wells Fargo, Goldman Sachs, and other financial giants releasing their full-year results. These heavyweight reports will directly reflect the financial sector’s performance over the past year and outlook for the future.

In addition to banks, companies like Delta Air Lines and TSMC are also key focus points. Their earnings performance is seen as an important window into consumer demand and the tech industry, providing concrete data to assess the economic fundamentals.

Policy Interventions and Judicial Risks Increase Market Volatility

Around January 13, the Trump administration took a series of aggressive measures against the Fed. The Department of Justice launched a criminal investigation into Fed Chair Powell, and the government also attempted to legislate to cap credit card interest rates at 10%. The Trump administration also planned to install allies on the Federal Reserve Board, attempting to push interest rates down by 3 percentage points.

These actions triggered intense market reactions, with bank stocks plunging and the dollar index falling to 98.7. The increased uncertainty in the policy environment has significantly contributed to subsequent market volatility.

Tariffs and Government Operations Threaten Long-term Outlook

On January 14, the Supreme Court will rule on the Trump administration’s tariff case involving up to $150 billion. If the ruling is unfavorable to the White House, the government will need to refund over a hundred billion dollars in tariffs and related interest, which could deal a fatal blow to Trump’s core economic policies. Even if the government loses, the White House is prepared to use alternative legal tools to continue tariff policies, demonstrating its persistence. The ruling will directly impact U.S. inflation trends and the Fed’s future rate cut pace.

Meanwhile, the U.S. government faces the risk of another shutdown on January 31. Although Congress previously reached an agreement to extend government operations until the end of the month, core disagreements remain over the extension of the Obamacare tax credits. About 22 million Americans could face doubled healthcare premiums, and if no agreement is reached before the end of the month, the U.S. will face a new round of government shutdowns.

The interplay of these key events creates multiple pressures on the market following the non-farm payroll data release. Whether in monetary policy, fiscal policy, or regulatory environment, significant uncertainties exist that will profoundly influence future market trends.