By Davide Barbuscia
NEW YORK (Reuters) – U.S. investors rattled by this week’s sharp tech sell-off will closely watch upcoming jobs data for signs of continued economic resilience, which could fuel inflationary concerns already stoked by President Donald Trump’s policies.
The January nonfarm payrolls report due next week will signal whether the labor market remains buoyant despite high borrowing costs. The Federal Reserve left interest rates unchanged on Wednesday, citing a strong economy and inflation still above its 2% target.
Markets will also be on alert for hints of economic overheating, which could exacerbate fears that Trump’s trade and immigration policies could reignite inflation. Earlier this month stocks sold off after a December jobs report reinforced bets the Fed would ease rates slowly this year.
“The employment report will be key to determining whether we are still on track with a labor market that’s solid but is not driving inflationary pressures through to the service economy,” said Tony Rodriguez, head of fixed income strategy at Nuveen.
Stocks tumbled earlier this week as Chinese startup DeepSeek’s budget-friendly artificial intelligence model fueled fears that U.S. tech giants might be overpriced. While stocks have clawed back some ground, the sell-off dampened recent optimism about the U.S. economy.
“Investors have been confused by a wave of disparate data this week, including news on AI, Trump administration policies, the FOMC meeting, and earnings,” Mark Hackett, chief market strategist at Nationwide said in a note.
“The gyrations in the large technology space provide further evidence that the risk/reward balance in that space is stretched, and it is susceptible to a sell-off,” he said.
Quarterly financial results from Alphabet and Amazon are on deck next week, following a mixed bag of earnings reports from other members of the so-called Magnificent Seven megacap tech stocks.
Economic policy uncertainty under the new administration, including Trump’s threat of punitive tariffs on large U.S. trade partners, will likely continue to keep investors on edge.
That is partly why the markets are honing in on next week’s economic data, said Byron Anderson, head of fixed income at Laffer Tengler Investments.
“Uncertainty in markets is making market participants focus on these data points so intently,” he said. “When markets have no long-term vision … the data moving forward will get all the attention.”
(Reporting by Davide Barbuscia; Editing by Richard Chang; Wall St Week Ahead runs every Friday.For the daily stock market report, please click [.N])
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