It was a brutal day for global markets, as a cocktail of weak U.S. jobs data, surging Fed rate cut bets, and a fresh wave of Trump-era tariffs sent investors fleeing risk and stocks tumbling.
By Friday afternoon, the S&P 500 was down 1.57%, the Nasdaq had crashed 2.16%, and the Dow Jones had given up over 500 points, making it one of the worst trading days since April.
Meanwhile, the MSCI World Index fell 1.27%, marking its largest daily drop in over three months, and Treasury yields and the U.S. dollar plunged as traders quickly recalibrated expectations for the Federal Reserve to slash rates in September.
The spark that lit this sell-off? July’s U.S. nonfarm payrolls report, which showed the economy added just 73,000 jobs, way below the 110,000 expected by economists.
To make matters worse, June’s job growth was revised down dramatically, from 147,000 to a meager 14,000. That’s not a typo.
The unemployment rate also ticked up to 4.2%, adding more concern that the labor market may be losing steam faster than anticipated.
Markets responded swiftly. According to the CME FedWatch tool, odds of a Fed rate cut in September jumped to 69%, up from just 37.7% the day before.
“The market is reacting to the possibility of the economy flipping into recession,” said Luke Tilley, Chief Economist at Wilmington Trust.
As if the weak jobs data weren’t enough, former President Donald Trump announced sweeping new tariffs ahead of an August 1 deadline, a geopolitical curveball that further shook investor confidence.
Here’s a quick breakdown:
In Canada, tariffs increased to 35% from 25%, India hit with 25% tariffs, Taiwan 20%, and Thailand 19%.
On the other hand, South Korea got 15% more tariffs and Mexico got a 90-day reprieve for ongoing trade talks.
This aggressive tariff hike spurred fears of renewed trade wars and higher input costs for multinational companies especially as inflation remains a key concern.
Big tech didn’t escape the carnage. Shares of Amazon (AMZN.O) sank more than 8% after its latest earnings report showed disappointing cloud growth, despite solid numbers earlier this week from Microsoft and Meta.
“We’ve had mixed earnings from big companies, a weak labor report, and broad tariffs, all playing into today’s sell-off,” said Scott Wren, Sr. Global Market Strategist at Wells Fargo.
Investors poured into U.S. Treasuries after the report, which sent yields into a freefall: 10-year Treasury yield dropped to 4.228% and 2-year yield, which closely tracks Fed policy expectations, plunged 23.7 basis points to 3.715%.
This sharp yield drop shows the market is fully pricing in a dovish pivot by the Fed, possibly as early as September.
The macro pain spilled into energy and commodity markets: U.S. crude fell 2.79% to $67.33 a barrel, Brent crude slid 2.83% to $69.67, amid fears of oversupply from OPEC+, and gold surged 1.78% to $3,348.72/oz, as investors flocked to safe-haven assets.
Friday’s triple-whammy, weak jobs, aggressive tariffs, and tech earnings jitters signal a shift in market sentiment. While the S&P 500 is still up sharply in 2025, this pullback could mark a cooling period or even a more sustained correction.
However, if you’re a long-term investor, this dip could offer opportunities, particularly in interest-rate-sensitive sectors and dividend-paying stocks poised to benefit from lower borrowing costs.
