On Friday, August 1st, the U.S. stock market saw a significant downturn driven by disappointing July employment data and the imposition of new tariffs by the U.S. on dozens of trading partners, eroding investors’ confidence in the economic outlook.
The three major U.S. indexes all closed in the red on Friday. The Dow Jones Industrial Average fell by 542.40 points, or 1.23%, to close at 43,588.58 points. The S&P 500 Index dropped 101.38 points, or 1.60%, to end at 6,238.01 points. The Nasdaq Composite Index slid 472.32 points, or 2.24%, finishing at 20,650.13 points, marking the largest single-day declines since June, May, and April respectively.
The S&P 500 Index closed lower for the fourth consecutive trading day this week, totaling a 2.4% decline, a stark contrast to the record-setting gains of the previous week.
In July, the U.S. added only 73,000 nonfarm payroll jobs, significantly below economists’ expectations of 100,000. Adding to concerns, the Labor Department also revised down the employment data for May and June, with June’s job additions plummeting from 147,000 to a mere 14,000 and May’s data revised from 125,000 to just 19,000.
Ahead of the release of employment figures, President Trump signed an executive order imposing tariffs on dozens of countries, including Canada, Brazil, India, and Taiwan. The White House further announced an additional 40% punitive tariff on goods that are rerouted to evade tariffs.
Under the dual pressure of these negative factors, concerns about economic slowdown and declining corporate profits have sharply risen in the market.
Simultaneously, underwhelming corporate earnings reports have also led to declines in the technology and financial sectors, dragging down overall stock performance.
On Friday, Amazon’s stock price tumbled by 8.3%, despite the company reporting strong earnings and sales performance for the latest quarter. However, the growth of its cloud computing business (AWS) fell short of market expectations, disappointing investors.
Apple’s stock price dipped by 2.5%. The company warned in its earnings report that U.S. tariffs on imported goods would result in an additional $1.1 billion in costs for the quarter. While Apple’s revenue and profit figures exceeded expectations, concerns about future operational pressures continue to weigh on the market.
JPMorgan Chase dropped by over 2%, while Bank of America and Wells Fargo each saw declines of more than 3%. Market worries that an economic slowdown will impact loan demand and bank profitability.
Energy and industrial sectors were not spared either, with Exxon Mobil’s stock price falling by 1.8% and Caterpillar dropping nearly 2%.
Market panic surged with the Chicago Board Options Exchange Volatility Index (VIX) rising by 3.66 points to close at 20.38, hitting a new high since June 20th.
Simultaneously, the new round of tariffs led to global stock market weakness, with Germany’s DAX Index falling by 2.7%, France’s CAC 40 Index dropping by 2.9%, and South Korea’s Kospi Index plummeting by 3.9%.
Following the July employment report, market expectations for a Fed rate cut in September spiked. According to CME’s FedWatch data, traders now see an 86% probability of at least a 0.25 percentage point rate cut by the Federal Reserve at the September meeting, a significant increase from around 40% on the previous trading day.
There is a widely held belief in the market that the Federal Reserve will be forced to act more swiftly to address the risks of economic slowdown.
Brian Jacobsen, Chief Economist at Annex Wealth Management, remarked, “No matter how you spin this report, it doesn’t look good. The labor market is stagnating, and the data from the previous months has been significantly revised downward. Last year, the Fed had to resort to a ‘corrective rate cut’ at the next meeting after not cutting rates in July, and history might repeat itself this year.”
Amid market disappointment with the data, President Trump announced on Friday that he had instructed to fire Erika McEntarfer, the Commissioner of the U.S. Bureau of Labor Statistics (BLS), accusing her of manipulating employment data multiple times.
Trump posted on Truth Social, saying, “I was just informed that the U.S. ’employment data’ was concocted by Dr. Erika McEntarfer, appointed by Biden, who falsified employment data before the election to boost Harris’s chances of winning.”
“I have directed my team to immediately dismiss this politically appointed official by Biden, and she will be replaced by someone more competent and qualified. Such crucial figures must be fair and accurate, not manipulated for political purposes,” Trump wrote.
Trump also criticized Fed Chair Jerome Powell, stating that he is “always too late” and should “retire.”
These events further heightened uncertainty in the market about economic data and policy prospects. Investors are closely watching the Federal Reserve’s actions in the coming weeks to assess whether policy shifts can reverse the situation.
Ellen Zentner, Chief Economic Strategist at Morgan Stanley, noted, “The once-resilient labor market is starting to show cracks as tariffs gradually seep into the economic system. For the Fed, which had been hesitant about rate cuts, the path to a rate cut in September will become clearer, especially if data in the next month further confirms this trend.”