Volatility was back on Wall Street during Wednesday’s trading session, this time with a surprisingly strong jobs report for January playing a central role in the turbulence.

The Dow Jones Industrial Average briefly traded in record territory near 50,499 after the opening bell, after the delayed January jobs report revealed that the U.S. economy created more jobs last month than economists expected.

However, the blue-chip average quickly turned negative, then flipped between gains and losses before closing lower for the first time in four sessions. The all-important 10-year Treasury yield jumped above 4.2% but ending at a 3 p.m. Eastern time level of 4.17%.

Comments from White House officials, including economic adviser Kevin Hassett, had led some investors to believe that the data would disappoint. Other recent data points haven’t exactly painted a flattering picture of the state of the U.S. consumer and labor market.

“It was a foreboding setup to today’s jobs number,” said George Catrambone, head of fixed income for the Americas at DWS, pointing to flat retail sales for December, an ugly Challenger, Gray & Christmas report on jobs layoffs in January and other signs of a sputtering labor market.

When the data were finally released, they showed that the economy added 130,000 new jobs in January, far more than Wall Street was expecting, while the unemployment rate fell to 4.3% from 4.4% in December.

“I would say it was most definitely a surprise to the upside,” Catrambone said of the initial reaction in bonds. But that shock faded as investors digested other aspects of Wednesday’s labor data, such as revisions that revealed the economy added only 181,000 new jobs for all of 2025 — a collapse of 2 million or more from prior years.

So what caused the big reversal in stocks? Some market strategists chalked it up to this: A stronger labor market could complicate the outlook for inflation and interest-rate cuts.

“The jobs report was strong, especially since the Trump administration lowered the expectations bar,” said Michael O’Rourke, chief market strategist at JonesTrading. “As a result, the anticipated [Federal Open Market Committee] rate cut will be postponed for the foreseeable future. The Treasury bond market reacted appropriately by selling off. The optimistic reaction in the S&P 500 was unmerited and was sold into.”

Investors are now looking ahead to the next reading on inflation, which is due on Friday with the release of the consumer-price index for January.

Wall Street’s “fear gauge” was active Wednesday, with the Cboe Volatility Index briefly jumping to as high as 18.9, according to FactSet, after starting the week around the 17 level.

DWS’s Catrambone cautioned against reading too much into one jobs report, given that it still appears to be a “low-hire, low-fire economy.”

That appeared to be a big takeaway for investors in the stock market, with small-cap stocks in the Russell 2000 index taking a 0.4% hit on Wednesday.

Investors had been piling into parts of the stock market that could benefit from a reaccelerating economy and more Fed rate cuts, including small-cap equities, while also seeking places to hide from tumult related to artificial intelligence.

“The knee-jerk reaction to the better jobs report was initial strength, then weakness,” said Ryan Detrick, chief market strategist at the Carson Group. “Many are realizing rate cuts just took a hit due to the firming labor market.”

In response to the jobs data, futures traders pushed up expectations that the Federal Reserve will likely keep rates on hold through June, according to the CME FedWatch Tool. Fed Chair Jerome Powell’s term ends in May.

“We don’t think this jobs-day volatility is anything to be overly concerned with right now,” Detrick said. “The bottom line is that the U.S. and global economy are showing signs of improvement, led by very strong earnings.”

But other risks to stock-market stability continued to percolate. A selloff in software stocks resumed on Wednesday after a three-day pause. The iShares Expanded Tech-Software Sector exchange-traded fund fell 2.6%. Erstwhile AI leaders like Microsoft Corp. and Alphabet Inc. have struggled since the start of the new year.

With the outlook for interest rates still so uncertain, a return of volatility in the bond market could easily bleed over into stocks.

“There are too many unknowns in the market,” said Ryan Jacobs, founder of Florida-based advisory firm Jacobs Investment Management, pointing to uncertainty around the timing of the next Fed interest-rate cut.