U.S. Stock Market Experiences Worst Day Since May
The U.S. stock market had a rough day on Friday, with the S&P 500 falling 1.6% and the Dow Jones Industrial Average dropping 1.2%. This decline was largely attributed to a sharp slowdown in hiring and the imposition of sweeping tariffs on imports from several U.S. trading partners by President Donald Trump.
Sharp Slowdown in Hiring
The latest report on job growth in the U.S. showed that employers added only 73,000 jobs in July, which is sharply lower than economists expected. The Labor Department also reported that revisions shaved a stunning 258,000 jobs off May and June payrolls. This news heavily reinforced worries on Wall Street about a weakening economy.
Tariff News Adds to Uncertainty
Markets also reacted to the latest tariff news, with President Donald Trump announcing tariff rates on dozens of countries and pushing back the scheduled effective date to August 7. This move adds more uncertainty to the global trade picture, making it difficult for businesses to make forecasts.
Market Reaction
The S&P 500 posted a 2.4% loss for the week, marking a sharp shift from last week’s record-setting streak of gains. The Nasdaq composite fell 2.2%, and the Dow Jones Industrial Average dropped 542.40 points to 43,588.58. The yield on the 10-year Treasury fell to 4.21% from 4.39% just before the hiring report was released.
Impact on Interest Rates
The surprisingly weak hiring numbers led investors to step up their expectations for an interest rate cut in September. The market’s odds of a quarter-point cut by the Federal Reserve rose to around 87% from just under 40% a day earlier. The question now is whether the Fed’s policymakers will consider a half-point cut next month or even a quarter-point cut sometime before their next committee meeting.
Global Impact
The Fed has held rates steady since December, and a cut in rates would give the job market and overall economy a boost. However, it could also risk fueling inflation, which is hovering stubbornly above the central bank’s 2% target. The central bank counts "maximum employment" as one of its two mandates, along with keeping prices stable. Issues with either of these goals could prompt a shift in policy.
Business Impact
Companies have been warning investors that the tariff policy has made it difficult to make forecasts. Walmart, Procter & Gamble, and many others have warned about import taxes raising costs, eating into profits, and raising prices for consumers. Internet retail giant Amazon fell 8.3%, despite reporting encouraging profit and sales for its most recent quarter. Technology behemoth Apple fell 2.5% after also beating Wall Street’s profit and revenue forecasts.
Conclusion
The U.S. stock market’s worst day since May was a result of a combination of factors, including a sharp slowdown in hiring and the imposition of sweeping tariffs on imports. The market’s reaction has been significant, with the S&P 500 and Dow Jones Industrial Average experiencing significant declines. The impact of these events will be closely watched in the coming weeks, and the Federal Reserve’s decision on interest rates will be crucial in determining the direction of the economy. As the global trade picture continues to evolve, businesses and investors will be looking for clarity and stability in the market.
