12:55 PM EST, 01/10/2025 (MT Newswires) -- US equity indexes fell as a beat on nonfarm payrolls and rising inflation expectations sent government bond yields flying, increasing the probability that interest rates will remain higher for longer.

The S&P 500 dropped 1.7% to 5,816.2, with the Nasdaq Composite down 2% to 19,091.3 and the Dow Jones Industrial Average 1.7% lower at 41,932.5. All sectors were in the red intraday, led by financials, technology, and real estate.

The December employment report showed nonfarm payrolls rose by 256,000, above the 165,000 jobs increase expected in a survey compiled by Bloomberg, the US Bureau of Labor Statistics reported. November payrolls saw a downward revision to a 212,000 increase, while October payrolls were revised upwards to a 43,000 gain, for a net downward revision of 8,000 jobs.

The unemployment rate fell to 4.1% in December from 4.2% in November, compared with a 4.2% rate expected.

Hourly earnings rose by 0.3%, as expected, and followed a 0.4% increase in November. Hourly earnings were up 3.9% year-over-year, slower than a 4% pace in November.

"There were virtually no signs of underlying weakness in the labor market," TD Economics said in a report. The research outfit expects the Fed "will be on hold this month," though the next few months of data will be "critical in shaping the final decision" for March.

The probability that the Fed will remain on a policy hold across all its rate-setting meetings through December jumped on Friday, according to the CME Group's FedWatch Tool. The likelihood of the target rate remaining unchanged in March in its 4.25% to 4.5% range surged to 72% from 56% a day ago. The announcement is due Jan. 29.

Further, in economic news, the University of Michigan's preliminary consumer sentiment index slid to 73.2 in January from 74.0 in December, versus forecasts for no change in a Bloomberg-compiled survey. Respondents saw one-year inflation expectations at 3.3%, up sharply from 2.8% and the highest since May 2024, while the five-year inflation outlook accelerated to 3.3% from 3% a month ago.

The US Treasury yields jumped intraday, with the 10-year trading up 7.4 basis points to 4.76% after touching an intraday 52-week high of 4.79%. The two-year yield catapulted 11.3 basis points to 4.38%.

In company news, Walgreens Boots Alliance ( WBA ) shares surged 25% intraday, the top performer on the S&P 500, after the company reported fiscal Q1 results that topped analyst expectations, with a year-over-year increase in revenue.

Constellation Energy ( CEG ) agreed to acquire privately-held energy company Calpine in a cash-and-stock deal for a net price of $26.6 billion, including debt. Its shares soared 22% intraday, among top gainers on the S&P 500 and the Nasdaq.

West Texas Intermediate crude oil futures soared 3.3% to $76.33 a barrel.

The US plans to sanction 180 tankers, oil traders, two oil companies, and oil executives in Russia, Reuters reported Friday, citing a document circulating among traders in Asia and Europe whose veracity the news agency "could not verify." The media speculation follows a decision by a Chinese port operator this week to ban sanctioned tankers from Russia and Iran.

Gold futures jumped 1.2% to $2,722.21 an ounce, and their silver counterpart advanced 1.2% to $31.38 per ounce.