Non-farm payrolls join forces with Powell, U.S. stocks face a "big test" tonight!

Investors should be prepared for Friday, a crucial day for the market, when key updates on the job market and Federal Reserve Chairman Jerome Powell's midday speech will be released.

Although the data has not yet shown signs of economic weakness, investors are already on alert for potential spillover effects from the data, especially as the Trump administration implements reciprocal tariff measures, while Musk's "Department of Government Efficiency" (DOGE) attempts to significantly reduce the size of the federal government, and Republicans in Congress hope to create room for tax cuts in the budget.

BNY Mellon’s macroeconomic strategist John Velis stated that the non-farm report could reveal another piece of the economic puzzle. However, he warned that if the data is weaker than expected, it could trigger market panic.

Wall Street expects 160,000 new jobs to be added in February, with the unemployment rate remaining unchanged at 4%. This data has not yet reflected the federal workforce reductions under the Trump administration.

The stock market often experiences significant volatility when economic data surprises or when Powell discusses the interest rate path. This has been the case even before growth concerns are revisited.

"Employment data will be a key test of economic resilience," said Andrew Husby, senior U.S. economist at BNP Paribas. While he expects the current unemployment rate to remain stable, the risk is that negative sentiment could quickly accumulate and lead to cancellations of corporate plans.

In this scenario, "the Federal Reserve may need to take measures to support economic growth," Husby said.

The market has been unsettled by Trump's trade war due to concerns that measures initially seen as protecting the U.S. border from fentanyl and illegal immigration could spiral out of control, ultimately imposing heavy costs on families, businesses, and the U.S. economy.

Amid concerns about economic growth, the yield on the 10-year U.S. Treasury bond sharply fell from a peak of 4.8%, but rebounded to 4.28% on Thursday.

On Wednesday, the stock market rose after automakers received a new one-month suspension of a 25% tariff. These tariffs could be painful for Canada and Mexico and could severely impact the core of U.S. industry, becoming a drag on economic growth.

Despite new tariff exemptions for Mexican goods, the stock market fell sharply on Thursday, with the Nasdaq approaching correction territory. According to Dow Jones market data, if the closing price is below 18,156.50 points, it will mark at least a 10% decline from the previous record high for the Nasdaq, confirming entry into correction territory. As of Thursday, the Nasdaq has fallen 5% year-to-date.

The S&P 500 index has dropped 2.8% year-to-date, while the Roundhill Magnificent Seven ETF, which tracks a group of large tech stocks, has further entered correction territory. The Dow Jones has decreased by 0.3% year-to-date.

This is inconsistent with Wall Street's expectations during Trump's campaign, when he promised tax cuts and other "growth-promoting" policies. Instead, his second term has begun with tariffs, growth concerns, and government layoffs led by MuskFriday will be the first complete monthly employment report for Trump 2.0. In the weeks since his inauguration, the U.S. has disrupted long-standing military and economic alliances and pressured Ukraine to allow the U.S. access to its mineral wealth in exchange for help in reaching a peace agreement with Russia.

On Wednesday, U.S. stocks briefly rebounded after Trump held talks with executives from Ford Motor Company, General Motors, and Stellantis, leading to a one-month suspension of a 25% tariff on cars from Canada and Mexico.

However, Canada has announced retaliatory measures, with Ontario Premier Doug Ford stating that his province will also "tear up" the $100 million contract with Musk's Starlink and prohibit all U.S. companies from participating in government contracts. Ontario and several other Canadian provinces have also banned the import of U.S. wine, beer, and spirits.

Welles said that a concerning sign for the U.S. and its massive deficit is that demand for 7 to 10-year U.S. Treasuries has disappeared among foreign buyers, a trend that has worsened since early December last year, "which will become a major problem if it cannot be reversed."