Stocks Drop as Job Growth Slows and Tariffs Escalate – US Market Wrap
Wall Street experienced a widespread flight from risk assets, with stocks falling amid signs of labour market weakness, and Trump’s latest round of tariffs and geopolitical worries. Bond yields and the dollar fell on bets that the Federal Reserve would cut interest rates.
The S&P 500 fell 1.6%, the most since May. Amazon’s uninspiring outlook drove the shares down 8.3%. The VIX, or “fear gauge” on Wall Street, surpassed 20. Two-year yields were set for their steepest drop since March 2023, falling 28 basis points to 3.68%. Gold rose after Trump said the US is moving two nuclear submarines in response to “provocative” statements from former Russian President Medvedev.
Job growth slowed sharply, and the unemployment rate rose, with payrolls increasing by 73,000 in July after the previous two months were revised down by nearly 260,000. In the last three months, employment growth has averaged just 35,000. Money markets have fully priced in two rate cuts in 2025, with an 80% chance of one coming in September.
Stocks fell sharply after racing to record highs on the back of resilient economic growth, signs of cooling inflation, and a frenzy for AI-linked stocks. With valuations high, traders are now facing a harsher backdrop, with renewed debate over how quickly the Fed will be forced to cut rates.
