Wall Street Faces Decline Amidst Weak Job Growth and Tariff Updates
Market Reactions to Economic Indicators
New York: On Friday morning, Wall Street experienced a downturn as stocks dropped significantly and Treasury yields decreased sharply following a report indicating a notable slowdown in hiring for the previous month.
The markets are also responding to recent tariff developments. President Donald Trump has postponed the implementation date for punitive import taxes affecting numerous countries, which are now set to begin on August 7 for those that have not reached an agreement with the US.
The S&P 500 index saw a decline of 1.5 percent, indicating a likely loss for the week. The Dow Jones Industrial Average fell by 599 points, or 1.4 percent, by 9:44 AM Eastern Time, while the Nasdaq composite dropped by 2 percent.
Concerns regarding a weakening economy were amplified by the latest job growth report, which revealed that employers added only 73,000 jobs in July, significantly below economists' expectations. Additionally, the Labor Department's revisions indicated a reduction of 258,000 jobs from the payrolls of May and June.
These unexpectedly low hiring figures have led investors to increase their predictions for an interest rate cut in September.
The yield on the 10-year Treasury bond decreased to 4.24 percent from 4.39 percent just before the job report was released. Similarly, the yield on the two-year Treasury, which is more closely aligned with Federal Reserve expectations, dropped to 3.75 percent from 3.94 percent prior to the report's release.
The market anticipates that the Federal Reserve may need to lower interest rates to support a struggling job market, having maintained rates since December. While a rate cut could stimulate the job market and the economy, it also poses a risk of increasing inflation, which remains above the central bank's 2 percent target.
Currently, Wall Street is predicting an 80 percent likelihood of a quarter-point rate cut during the Fed's September meeting, a significant rise from just under 38 percent the previous day.
In contrast, Apple shares rose by 0.3 percent following a positive earnings report.