Previously skeptical traders may be coming around to the idea the Federal Reserve could follow an expected 25 basis point interest rate hike in March with another in May, after a much stronger-than-expected January U.S. jobs report.
Fed-funds futures on Friday morning reflected a 97.4% probability the Fed would raise the rate by 25 basis points to a range of 4.75% to 5% at the conclusion of its next policy meeting on March 22, up from an 82.7% probability on Thursday.
For May, investors now see a 51.6% chance of another quarter-point rise to 5% to 5.25%, the level which the Fed has signaled is its expectation for a peak. On Thursday, investors saw just a 30% chance of a quarter-point rise in May.
The U.S. economy added 517,000 jobs in January, far exceeding economist expectations for a rise of 187,000, while the unemployment rate fell to 3.4%, its lowest since 1969. Average hourly earnings rose 0.3%, in line with expectations.
See: U.S. jobs report shows blowout 517,000 gain in employment in January
U.S. stocks fell on Friday, but the S&P 500
and Nasdaq Composite
remained on track for weekly gains. The Dow Jones Industrial Average
as down 165 points, or 0.5%, on track for a 0.2% weekly fall.