US STOCKS-Wall Street muted after strong jobs data nibbles at Fed rate cut bets

The S&P 500 closed virtually unchanged on Wednesday as a stronger-than-expected employment report eased worries about the economy but also fueled bets that the Federal Reserve could slow its interest-rate ‌cuts. Wall Street's three main indexes had started the session on a strong note, with the S&P 500 and the Nasdaq hitting their highest level in more than a week after the closely watched payrolls report showed much faster than expected U.S. job growth in January while the unemployment rate fell to 4.3%.

However, ‌gains subsided as traders dialed back on bets for rate cuts. While traders are still banking on at least one 25-basis-point cut in June, ‌the probability that rates would hold steady that month crept up to 41% from 24.8%, according to the latest data from CME Group's FedWatch tool. Julia Hermann, global market strategist at New York Life Investments, said that investors digested changes to rate cut bets "quite well" because they interpreted the strong jobs report as good news for the economy.

"This is constructive news in that ⁠the economy ​is not in dire need of rate ⁠cuts because the jobs market has been showing some new signs of life," she said. "It comes down to the sweet spot of hiring being strong enough to show us the ⁠economy is resilient but not so strong as to derail expectations for future Fed easing." Investors will next turn their attention to the January Consumer Price Index (CPI) inflation report, which ​is due out on Friday.

According to preliminary data, the S&P 500 lost 0.93 points, or 0.01%, to end at 6,940.88 points, while the ⁠Nasdaq Composite lost 41.51 points, or 0.18%, to 23,060.97. The Dow Jones Industrial Average fell 70.56 points, or 0.14%, to 50,117.58. Technology was a mixed bag with chip stocks rallying sharply and software stocks ⁠tumbling ​again after three sessions of recouping losses from last week's steep selloff fueled by fears of AI-fueled disruption. The Philadelphia semiconductor index rallied, while the S&P 500 software index lost ground.

Brokerage firms that already fell on Tuesday after startup Altruist announced AI-enabled tax-planning features extended their declines on Wednesday with Charles Schwab, ⁠LPL Financial and Ameriprise Financial all falling during the session. The rate-sensitive S&P 500 bank index also lost ground. Generac shares rallied after its fourth-quarter results while Robinhood ⁠shares tumbled after the retail brokerage missed ⁠fourth-quarter revenue expectations. Humana shares fell after the health insurer forecast 2026 profit below Wall Street estimates. Moderna shares dropped after the U.S. Food and Drug Administration decided not to review the company's application for approval of its influenza ‌vaccine.