U.S. stocks saw notable declines on Friday, with the major indices dipping after the release of a weak July jobs report and President Trump's official announcement of tariff hikes. The Dow Jones Industrial Average (DJI) dropped around 1%, the S&P 500 (GSPC) fell approximately 1.2%, and the Nasdaq Composite (IXIC) lost around 1.6%. These declines followed a losing day for the markets on Thursday, and despite strong earnings from several big tech firms, the broader market sentiment was muted.
The weak labor market data showed a slowdown, with only 73,000 jobs added in July, far below the expected 104,000, and with significant downward revisions to prior months. The report, combined with President Trump's new tariff measures, has traders on edge as they reassess the economic outlook.
Market Movers:
- Meta Platforms (META): +12.26%: Meta surged over 12% on Friday after strong earnings and better-than-expected guidance, continuing its rally following strong AI investments. Despite broader market concerns, Meta’s focus on AI and digital ad growth has buoyed investor sentiment.
- Microsoft (MSFT): -1.81%: Microsoft saw a slight pullback after its market cap briefly surpassed $4 trillion, following its impressive earnings report earlier this week. While the company continues to lead in AI development, investors are wary of potential regulatory challenges as Microsoft faces scrutiny over its relationship with OpenAI.
- Amazon (AMZN): -8%: Amazon dropped after disappointing earnings from its AWS cloud unit. While the company raised its capital expenditure forecast, the weaker-than-expected cloud results raised concerns about its long-term AI plans. AWS’s lower performance led to a significant decline in share price, despite strong overall revenue.
- UnitedHealth (UNH): -3.86%: UnitedHealth fell after the company appointed a new CFO amidst leadership changes. The health insurance giant has faced significant challenges in the past year, with its stock down over 50%. Investors are looking to the new leadership for a potential turnaround.
- Reddit (RDDT): +20.83%: Reddit soared after the company reported second-quarter earnings that surpassed Wall Street’s expectations. The social media platform saw strong revenue growth and better-than-expected user engagement, helping to lift its stock by over 20%.
Jobs Report Signals Slowing Labor Market
The July jobs report showed a large slowdown in hiring, with only 73,000 jobs added, well below economists' expectations of 104,000. The revisions to the May and June reports were also concerning, with a total of 258,000 fewer jobs reported over those months than initially thought. The unemployment rate ticked up to 4.2%, adding to the concerns about the labor market's health. These signs of weakness in the job market have led to growing speculation that the Federal Reserve may take a more dovish stance, possibly considering rate cuts later this year.
In reaction to the disappointing jobs report, Treasury yields dropped, signaling a shift in expectations that the Fed may cut rates sooner rather than later. This move in the bond market reflects concerns that the economy may not be as strong as previously thought, adding volatility to investor sentiment.
Trump’s Tariff Hikes and Trade Tensions
The market also reacted to President Trump's announcement of sweeping tariff hikes. The U.S. is now imposing higher tariffs on several trading partners, including Canada, Taiwan, and India, with rates ranging from 15% to 40%. While the Trump administration extended the implementation of these tariffs by a week, the news still dampened market spirits. The tariffs are seen as a potential headwind for businesses, especially in the technology and consumer goods sectors, as companies may face higher production and export costs.
These developments have raised concerns about a potential trade war, especially after the U.S. and China have already engaged in contentious tariff negotiations. The market will closely monitor any further developments or shifts in trade policy that could affect global supply chains and corporate earnings.
Looking Ahead
As the market digests the weak jobs report and growing tariff tensions, all eyes will be on the Federal Reserve's next moves. While the central bank has indicated that it may not act immediately on rate cuts, the surprising cracks in the labor market could prompt a shift in monetary policy. Investors will be closely watching the Fed’s upcoming meetings to see if they signal any change in approach regarding interest rates. On the global trade front, investors will likely remain cautious as the full impact of the newly announced tariffs becomes clearer. If trade tensions escalate, companies may face additional cost pressures that could squeeze margins and impact earnings growth. Investors will also be watching for any resolution or clarification of trade agreements, particularly with the U.S.'s key trading partners.
In the coming days, further earnings reports from major tech companies like Apple, Microsoft, and Amazon will provide additional insights into the market’s direction. While the outlook for Big Tech remains strong, broader market risks, including trade uncertainties and economic slowdowns, may temper investor optimism.
