Markets drop on August 1 before rebounding as weak labour data boosts rate cut expectations
US labour weakness and sweeping new tariffs triggered a major sell-off on Friday, but markets rebounded just days later as rate cut bets gained traction.
The US Department of Labor reported on August 1 that nonfarm payrolls increased by only 73,000 in July, falling short of the 100,000 forecast by economists.
According to BNN Bloomberg, May and June were revised down sharply, cutting a combined 258,000 jobs. June's growth was adjusted to 14,000 from 147,000, and May to 19,000 from 125,000.
The unexpectedly weak data led to heightened expectations for a Federal Reserve rate cut.
As reported by BNN Bloomberg, CME FedWatch data showed the probability of a September quarter-point cut surged to 87 percent from just under 40 percent the day before.
Bond markets reacted accordingly: the 10-year Treasury yield dropped to 4.21 percent from 4.39 percent, while the two-year yield fell to 3.68 percent from 3.94 percent.
Markets fell hard on the jobs news and a simultaneous announcement of new US tariffs.
According to CNBC, the Dow Jones Industrial Average lost 542.40 points, or 1.23 percent, to close at 43,588.58 on Friday—its worst session since June 13.
The S&P 500 fell 1.60 percent to 6,238.01, while the Nasdaq Composite dropped 2.24 percent to 20,650.13. The S&P 500 posted its worst day since May 21 and ended a four-day losing streak.
All three indexes recorded weekly losses: the Dow declined 2.9 percent, the S&P 500 fell 2.4 percent, and the Nasdaq dropped 2.2 percent.
US President Donald Trump announced overnight tariff changes on dozens of countries, raising rates to between 10 percent and 41 percent, with a new 40 percent duty on transshipped goods.
Canada’s rate rose to 35 percent from 25 percent.
As per BNN Bloomberg, the updated levies—which were delayed to take effect August 7—covered 66 countries, the European Union, Taiwan, and the Falkland Islands.
Sam Stovall, chief investment strategist at CFRA, said the market has been hit by a combination of additional tariffs and weaker-than-expected US employment data.
“Not only for this month, but for the downward revisions to the prior months,” he added in BNN Bloomberg’s report.
Worries about slower US economic growth dragged down financial stocks.
JPMorgan Chase fell over 2 percent, while Bank of America and Wells Fargo dropped more than 3 percent each. Shares of GE Aerospace and Caterpillar also declined by nearly 1 percent and 2 percent, respectively.
Tech stocks were also hit.
Amazon fell 8.3 percent despite strong earnings, and Apple lost 2.5 percent after projecting a US$1.1bn hit from tariffs. Exxon Mobil declined 1.8 percent as quarterly profit fell to a four-year low.
But on Monday, markets reversed.
As reported by CNBC, the Dow rebounded by 585 points, regaining its Friday losses.
The S&P 500 rose 1.5 percent and the Nasdaq gained nearly 2 percent. The Russell 2000 jumped more than 2 percent, and over 80 percent of S&P 500 components advanced.
“You have to respect the momentum that the market has had. We’re still in a very powerful uptrend,” said Cameron Dawson, chief investment officer at NewEdge Wealth, on CNBC’s Closing Bell.
However, she added, “it wouldn’t be surprising to see some chop as we move through August.”
In extended trading on August 4, Palantir shares rose 4 percent after announcing it surpassed US$1bn in revenue for the first time. Hims & Hers Health declined more than 13 percent after its second-quarter revenue missed estimates.
According to CNBC, investors are watching for earnings from Pfizer, Yum! Brands, and Fox before the bell on Tuesday, August 5, with Snap, AMD, and Rivian set to report after the close.
Economic data on the US trade deficit and purchasing activity is also expected that morning.
