U.S. stock markets experienced a sharp downturn on Friday, as investors grappled with a dual shock of sweeping new trade tariffs and a surprisingly weak jobs report, stoking fears of an economic slowdown. The major indices were set for significant weekly losses, capping a volatile week that also saw mixed results from Big Tech earnings.
By mid-morning, the Dow Jones Industrial Average (^DJI) had fallen approximately 1.4%, while the S&P 500 (^GSPC) dropped around 1.5%. The technology-heavy Nasdaq Composite (^IXIC) saw the steepest decline, sinking about 1.9%. These losses put the Dow and S&P 500 on track for weekly losses of about 3% and 2.5%, respectively, according to reports from Yahoo Finance.
Tariff Tremors and Labor Market Cracks
The market sell-off was ignited by President Trump’s executive order on Thursday, which authorized significant tariff hikes on dozens of U.S. trading partners. The new levies, described as “reciprocal,” include a hike to 35% on goods from Canada and rates ranging from 15% to 40% for other key partners like the European Union, Taiwan, and India. While the White House indicated a seven-day delay in implementation, opening a window for further negotiations, the move sent ripples of uncertainty through global markets, with European and Asian indices also sliding.
Compounding the anxiety was the July jobs report, which fell far short of expectations. The U.S. economy added only 73,000 jobs, significantly below the 104,000 forecasted by economists surveyed by Dow Jones. Furthermore, data for the prior two months was revised sharply downward, indicating that the labor market has been weaker than previously thought. The unemployment rate ticked up to 4.2%. CNBC reported that the dismal figures, including what one source called “stunning” downward revisions, have intensified concerns about the economy’s health.
Fed Rate Cut Bets Surge
The weak employment data immediately impacted the bond market, as traders increased their bets on the Federal Reserve cutting interest rates this year. The yield on the benchmark 10-year Treasury note (^TNX) dived, and the 2-year Treasury yield fell by more than 17 basis points. According to data from the CME Group, the probability of a rate cut at the Fed’s September meeting jumped to 75%, a dramatic increase from just 37% earlier in the week. This shift in sentiment follows the Fed’s recent decision to hold rates steady, a move that drew public dissents from two Fed governors, Michelle Bowman and Chris Waller, who argued the labor market was not as robust as it appeared.
A Mixed Bag for Big Tech
The macroeconomic gloom overshadowed a week of pivotal earnings reports from technology giants. While strong results from Microsoft (MSFT) and Meta (META) had provided an earlier boost, and Apple (AAPL) shares rose after beating expectations with strong iPhone sales, the mood soured with Amazon’s (AMZN) report. Amazon’s stock plunged as much as 8% after the performance of its AWS cloud computing unit failed to meet the high expectations set by its rivals, as noted by multiple outlets.
In other market news, design software company Figma (FIG) made a spectacular public debut, with its stock soaring 250% on its first day of trading. In the healthcare sector, shares of Novo Nordisk (NVO) and Eli Lilly (LLY) saw a boost following a report that the Trump administration is considering allowing Medicare and Medicaid to cover their popular weight-loss drugs.
Overall, the combination of renewed trade war fears and concrete signs of a cooling labor market has created a risk-off environment on Wall Street, leaving investors to weigh the uncertain path of both global trade policy and the Federal Reserve’s response to a potentially faltering economy.
