Financial markets experience a decline, triggered by Trump's tariff announcements and disappointing employment data.
Market Volatility and Economic Uncertainty: A Tumultuous Week in U.S. Stocks
In a whirlwind week for the U.S. stock market, the S&P 500 recorded its biggest single-day percentage decline since May 21, with the Nasdaq suffering its biggest daily percentage drop since April 21. This slide was primarily due to new U.S. tariffs and a weak jobs report, causing concerns about the health of the economy.
The CBOE Volatility Index, or Wall Street's fear gauge, closed up 3.66 points at 20.38, its highest close since June 20. Volume on U.S. exchanges was 19.51 billion shares, compared with the 18.44 billion average for the full session over the last 20 trading days. For the week, the S&P 500, Nasdaq, and Dow all posted losses.
The Nasdaq Composite recorded 29 new highs and 202 new lows, indicating a mixed picture for the tech-heavy index. The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all posted steep losses on Friday. Amazon was the biggest drag on the Dow, S&P 500, and Nasdaq, and pushed the consumer discretionary index down nearly 3.6%.
The consumer discretionary index was the worst performing of the 11 major S&P 500 sectors. The slump in the sector could be attributed to President Donald Trump's announcement about the firing of Erika L. McEntarfer, the commissioner of the U.S. Bureau of Labor Statistics, and his signing of an executive order imposing duties on U.S. imports from countries including Canada, Brazil, India, and Taiwan.
Stocks briefly extended declines following Trump's announcements. However, it's worth noting that the reasons for McEntarfer's firing, as stated by Art Hogan, Chief Market Strategist at B. Riley Wealth, Boston, stood out as irregular.
Expectations for a Federal Reserve interest rate cut at its September meeting surged due to the weak jobs report. A potential rate cut would aim to support the economy and labor market amid weakening job growth, but involves balancing inflation risks and market perceptions, with complex downstream implications for growth, employment, inflation, and household finances.
Market expectations indicate a notable chance (somewhat above 50% to about 63%) of a 25 basis point rate cut in September, with possible additional reductions across late 2025 and into 2026. Such consecutive cuts could signal a shift in Fed policy toward greater accommodation in response to weaker job growth and moderating economic activity.
However, rate cuts might be interpreted as a sign of economic trouble, which can create uncertainty or volatility in financial markets. Additionally, their effects typically occur with a lag, so immediate labor market improvements may not follow right away.
In sum, while a Fed rate cut in September 2025 would aim to support the economy and labor market amid weakening job growth, it involves balancing inflation risks and market perceptions, with complex downstream implications for growth, employment, inflation, and household finances.
[1] Federal Reserve Economic Data (FRED) [2] Bloomberg News [3] The Wall Street Journal [4] The New York Times [5] The Washington Post
- The volatile week in U.S. stocks was largely driven by new tariffs and a weak jobs report, events that sparked concerns about the health of the economy and led to a rise in the CBOE Volatility Index, also known as Wall Street's fear gauge.
- In the tech-heavy Nasdaq index, there were 29 new highs and 202 new lows, indicating a mixed picture, while the consumer discretionary index, the worst performing of the 11 major S&P 500 sectors, slumped due to President Donald Trump's actions related to imports and the firing of Erika L. McEntarfer.
- Stocks temporarily declined further following Trump's announcements, but the reasons for McEntarfer's firing were reported to be irregular.
- As a result of the weak jobs report, expectations for a Federal Reserve interest rate cut at its September meeting have surged, but such cuts could signal economic trouble and create uncertainty or volatility in financial markets.
- Given the complex downstream implications for growth, employment, inflation, and household finances, a potential September 2025 Fed rate cut would aim to support the economy and labor market amid weakening job growth, but involves balancing inflation risks and market perceptions.
