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(Bloomberg) — A much stronger-than-anticipated US jobs report spurred a slide in Treasuries as traders trimmed bets on Federal Reserve rate cuts this year. An initial rally in stocks waned amid a selloff in software companies.

Short-dated Treasuries were hit the hardest, with two-year yields set for their biggest increase since October. Money markets priced in the Fed’s next cut in July, from June previously. The S&P 500, which had earlier risen on hopes that economic strength would keep fueling earnings, was little changed. Most megacaps fell and an ETF tracking software giants tumbled 3%. Bitcoin sank to around $66,500.

US payrolls rose in January by the most in more than a year and the unemployment rate unexpectedly fell, suggesting the labor market continued to stabilize.

Employers added 130,000 jobs last month and the unemployment rate slid to 4.3%. That followed revisions to the prior year, which showed a marked slowdown in hiring. Job gains averaged just 15,000 a month last year, down from the initially reported 49,000 pace.

“Markets may have been expecting a downshift in today’s numbers after last week’s soft data, but the jobs market hit the gas pedal instead,” said Ellen Zentner at Morgan Stanley Wealth Management. “Today’s data shows an acceleration in employment that was strong enough to drive unemployment lower.”

This is the kind of report investors should welcome — even if it gives the Fed more room to stay put, said Bret Kenwell at eToro.

“Still, it’s important to keep perspective: this is one data point, and it doesn’t erase the recent softness elsewhere in the data. But if the labor market is indeed stabilizing, that would be constructive for both the economy and the market,” he said.

The bigger implication may be for stocks given that a stronger job market will likely support the “broadening trade,” according to Brad Conger at Hirtle Callaghan.

Ahead of the release of the report, traders were betting on a softer jobs data following the release of several downbeat job market indicators, noted Fawad Razaqzada at Forex.com. As it turned out, it was quite the opposite, he said

“The better-than-expected job numbers for January are a bright spot in an otherwise uncertain labor market,” said Jerry Tempelman at Mutual of America Capital Management.

If the recent jitters in the stock market are due to concerns of a weakening labor market and/or economy that is headed toward a recession, this report should alleviate those concerns in the short run, according to Chris Zaccarelli at Northlight Asset Management.

“Until we see significant weakness in the labor market, the economy or corporate profits, we believe this is still a market where dips can be bought,” he said.

The jobs report checked all the boxes today with better headline results, stronger participate rates, and the unemployment rate ticking lower, noted Art Hogan at B. Riley Wealth.

Despite labor market softening observed last year, economic strength is likely coming out of 2025 and carrying into this year — and that should leave companies reluctant to fire, while tight labor supply should keep a lid on the unemployment rate, noted Jennifer Timmerman at Wells Fargo Investment Institute.

Investors are shifting from trading headlines to focusing on earnings durability, balance-sheet strength, and selective growth, knowing volatility and rotation are likely as 2026 unfolds, according to Gina Bolvin at Bolvin Wealth Management Group.

“The market got the jobs report it needed,” said Brad Smith at Janus Henderson Investors. “Despite tight spreads and elevated multiples, we view this as a favorable backdrop for risk assets.”

Worst-case scenarios didn’t play out thanks to a private-sector rebound, according to David Russell at TradeStation. Today’s numbers seem to confirm the manufacturing rebound we’ve recently seen

“It’s good news for people worried about an imminent slowdown, but it also reduces the urgency to cut interest rates,” he said.

Looking through the noise, today’s print is a positive for risk assets given it shows a solid labor backdrop that can fuel further upside in consumption, said Jeff Schulze at ClearBridge Investment.

The release provides ammunition to the Fed hawks to maintain a patient approach to rate cuts, reinforcing the narrative of a stabilizing labor market, according to Angelo Kourkafas at Edward Jones

“Markets have adjusted accordingly, with bond futures now fully pricing in a Fed cut by July instead of June. From a portfolio standpoint, we expect the 10‑year yield to drift back toward the middle of its 4%–4.5% range, and we believe the rotation toward ‘old economy’ and pro‑cyclical sectors should continue,” he said.

The relatively healthy state of the labor market suggests that rate cuts are not imminently needed, which allows the Fed some time to digest incoming data before determining the appropriate course of action moving forward, noted Jason Pride at Glenmede.

“Investors should expect a base case of ~2 rate cuts in 2026, which are more likely to come under the leadership of the next Fed chair,” he said.

“Today’s employment report was a 10 out of 10 with positive surprises across the board,” said Peter Graf at Amova Asset Management Americas. “It should quell recent concerns about growth, but puts incoming Fed Chair Warsh in the hot seat — it will be even harder to persuade the FOMC members to go along with the President’s mandate to cut rates.

Interest-rate swaps after the data showed traders see less than 5% of a chance that policymakers lower rates when they meet in March. Traders have priced in a total of 49 basis points of policy easing by December — implying about two quarter-point rate cuts this year, compared with 59 basis points on Tuesday.

An improving employment outlook should allow the Fed to shift its attention toward the inflation mandate and its anticipated progress for 2026, according to Oscar Munoz and Gennadiy Goldberg at TD Securities.

They continue to forecast quarterly rate cuts of 25 basis points but now in June, September, and December, bringing the Fed funds rate to our projected terminal of 3%.

“Expected easing won’t be the result of worsening economic conditions, but rather the normalization of policy as inflation gradually returns to its target,” they said.

The labor market is showing some tentative signs of re-tightening, although there remains a way to go, according to Kay Haigh, at Goldman Sachs Asset Management.

“The FOMC’s gaze instead will turn to the inflation picture with the economy continuing to perform above expectations,” he said. “We still see room for two more cuts this year; however, an upside surprise in the CPI on Friday could tilt the balance of risks in a hawkish direction.”

Corporate Highlights:

T-Mobile US Inc. reported it added fewer mobile-phone subscribers than analysts expected in the fourth quarter, highlighting the challenge ahead for new Chief Executive Officer Srini Gopalan. Kraft Heinz Co. halted plans to split in two, a surprising reversal weeks after bringing in a new chief executive officer with experience breaking up a food company. Shopify Inc. beat analysts’ fourth-quarter estimates after strong holiday spending lifted revenues at the e-commerce firm. Humana Inc. forecast profit that fell short of Wall Street’s expectations for the year, the latest insurer to disappoint investors as the industry grapples with rising costs and government pressure. Ford Motor Co. expects profit to jump in 2026 even after a surprise $900 million tariff bill at the end of last year dented the carmaker’s earnings. Lyft Inc. issued a disappointing forecast that missed Wall Street expectations, a sign that its global expansion and new product offerings are not performing as quickly and as well as anticipated. Nike Inc. expects its wholesale business to pick up steam across the world as it accelerates the launch of new footwear and apparel products and doubles down on its commitment to sports. Chevron Corp., Eni SpA, QatarEnergy and Repsol SA were among major energy companies that won rights to explore for oil and gas in Libya, the latest sign that the nation that holds Africa’s largest crude reserves is opening up for investments following years of civil war. Robinhood Markets Inc. reported lower fourth-quarter profit as sharp declines in Bitcoin and other cryptocurrencies weighed on results at the online brokerage. Gilead Sciences Inc. forecast 2026 product revenue and profit that missed analysts’ expectations, even after it outperformed during last year’s fourth quarter. US regulators refused to review Moderna Inc.’s novel mRNA flu vaccine, dealing a major blow to the company as it seeks more products beyond its Covid shot. Domino’s Pizza Enterprises Ltd. named McDonald’s Corp. veteran Andrew Gregory as its new global chief executive officer, charging him with turning around the chain’s flagging fortunes. Toymaker Mattel Inc. reported holiday results that fell short of analysts’ estimates and issued a 2026 forecast for lower profit. Activist investor Ancora Holdings Group is urging the board of Warner Bros. Discovery Inc. to reject the offer by Netflix Inc. and reconsider a competing bid by Paramount Skydance Corp., adding a new plot twist to one of Hollywood’s biggest takeover battles. Cloudflare Inc. reported quarterly results that showed continued demand for its security and performance services, as enterprises prioritized network resilience and application protection. Hilton Worldwide Holdings Inc. reported fourth quarter earnings that beat expectations, as the company’s ability to add new hotels to its global network drove growth. The Federal Communications Commission said it hasn’t received a letter from 40 Congressional Republicans opposing the proposed merger of broadcasters Nexstar Media Group Inc. and Tegna Inc. Elliott Investment Management has built a stake in London Stock Exchange Group Plc as the FTSE 100 index owner grapples with disruption from artificial intelligence and a plunge in listings, a person with knowledge of the investment said. Commerzbank AG’s improved outlook for this year failed to sway investors, underscoring the challenges for Chief Executive Officer Bettina Orlopp as she continues to defend the bank against a potential takeover. ABN Amro Bank NV reported fourth-quarter profit that missed analyst expectations on higher-than-expected expenses and provisions for bad loans. Heineken NV will cut about 7% of its workforce to contend with an industry-wide slump in beer demand triggered by rising prices and consumers moderating their alcohol consumption. Bombardier Inc. won a 40-plane order for its Challenger 3500 aircraft from Vista Global Holding Ltd., one of the world’s biggest operators of business jets, amid growing global demand for private aviation. Dassault Systemes SE gave weak guidance, stoking concerns that artificial intelligence will disrupt its business model and turning the stock into one of the biggest targets yet of a fear-driven selloff in businesses viewed as vulnerable to AI. TotalEnergies SE trimmed its share buybacks to the lower end of its guidance range, aiming to keep debt in check as it adjusts to lower oil prices. Samsung Electronics Co. will unveil its latest mainstream Galaxy smartphones on Feb. 25 at an event in San Francisco, hoping to spur upgrades and fresh momentum in its rivalry with Apple Inc.’s iPhone and Android-based competitors. ASX Ltd. said chief executive Helen Lofthouse will leave the role in May, without naming a successor as the Australian exchange grapples with challenges including a regulatory probe. Some of the main moves in markets:

Stocks

The S&P 500 was little changed as of 10:57 a.m. New York time The Nasdaq 100 rose 0.2% The Dow Jones Industrial Average fell 0.4% The Stoxx Europe 600 was little changed The MSCI World Index was little changed Bloomberg Magnificent 7 Total Return Index was little changed Philadelphia Stock Exchange Semiconductor Index rose 1.7% IShares Expanded Tech-Software Sector ETF fell 3% The Russell 2000 Index fell 1.1% Currencies

The Bloomberg Dollar Spot Index was little changed The euro fell 0.3% to $1.1862 The British pound was little changed at $1.3638 The Japanese yen rose 0.5% to 153.55 per dollar Cryptocurrencies

Bitcoin fell 3% to $66,582.23 Ether fell 3.8% to $1,932.33 Bonds

The yield on 10-year Treasuries advanced three basis points to 4.17% Germany’s 10-year yield was little changed at 2.80% Britain’s 10-year yield declined two basis points to 4.48% The yield on 2-year Treasuries advanced six basis points to 3.51% The yield on 30-year Treasuries advanced two basis points to 4.81% Commodities

West Texas Intermediate crude rose 1.5% to $64.94 a barrel Spot gold rose 0.7% to $5,059.78 an ounce ©2026 Bloomberg L.P.