Stocks experienced a decline on Friday, marking the beginning of August trading, as investors assessed clear indications of an economic slowdown alongside President Donald Trump’s adjusted tariff rates. The Dow Jones Industrial Average experienced a decline of 542.40 points, equivalent to 1.23%, concluding at 43,588.58, marking its most significant drop since June 13. The S&P 500 experienced a decline of 1.60%, concluding at 6,238.01, marking its most significant drop since May 21. Meanwhile, the Nasdaq Composite fell by 2.24%, finishing at 20,650.13, representing its largest decrease since April 21.
The July jobs report indicated that nonfarm payrolls increased by 73,000 last month, significantly lower than the consensus estimate from economists surveyed by Dow Jones, which anticipated a rise of 100,000 in payrolls. Revisions to prior months were notably downward. In June, job growth amounted to a mere 14,000, a significant decline from the previous figure of 147,000. The May count decreased to 19,000 from 125,000, indicating that the labor market has been experiencing a decline for some time.
Bank stocks experienced a significant decline amid concerns that a decelerating economy may adversely affect loan growth. JPMorgan Chase experienced a decline of over 2%, whereas both Bank of America and Wells Fargo saw their shares drop by more than 3% each. GE Aerospace and Caterpillar experienced declines of nearly 1% and 2%, respectively. “What we’re seeing is concern about growth that comes at a time when market multiples have become quite elevated,” stated Thierry Wizman, global FX and rates strategist at Macquarie Group. “This also suggests a late summer growth concern, but it can be further nuanced by the notion that the dovish members of the FOMC were ultimately vindicated, reinforcing the perception that the Fed is lagging behind.”
The data heightened the likelihood that the Federal Reserve may take action sooner than anticipated to lower interest rates and support economic stability. Following the release of the jobs figures, traders assess the probability of a September rate cut at approximately 86%, as indicated by CME fed futures trading. That represents a shift from Wednesday, when the probabilities declined sharply following Fed Chair Jerome Powell’s indication that the central bank must pause and assess the effects of tariffs on inflation prior to making any cuts. The recent announcement by Trump regarding revised tariffs, which varied from 10% to 41%, has also impacted market sentiment. The White House has indicated that goods transshipped to circumvent tariffs will incur an additional 40% levy.
Canada, a significant trading partner of the United States, will now encounter a 35% tariff. That represents an increase from 25%. “Traders are securing profits as technology earnings diminish, macroeconomic risks escalate, and seasonal trends shift to a negative outlook.” “Breadth is narrowing, valuations are stretched, and defensive positioning is quietly building,” noted Joseph Cusick, portfolio specialist at Calamos Investments.
The decline in technology behemoths exerted pressure on the principal indices on Friday. Amazon’s shares experienced a decline exceeding 8% following the company’s provision of modest operating income guidance for the ongoing quarter. Apple’s shares experienced a decline of 2.5%. The major averages experienced a decline over the week, with the S&P 500 falling 2.4%, marking its most significant weekly drop since May 23, while the Dow decreased by 2.9%, reflecting its poorest weekly performance since April 4. The Nasdaq experienced a decline of 2.2% during the period.