Stock Market Plummets Most Since May Due to Reduced Hiring and Implementation of Tariffs
U.S. Stock Market Stays Resilient Amidst Tariff Uncertainties and Fed's Cautious Approach
The U.S. stock market showed resilience last Friday, despite some economic headwinds and the ongoing tariff policy of President Donald Trump. The Nasdaq composite fell 2.2%, the Dow Jones Industrial Average declined 1.2%, and the S&P 500 had its biggest decline since May 21 with a 1.6% drop.
The market's resilience might be due to investor expectations for future improvement, as the impact of tariffs on the U.S. stock market so far has been somewhat muted. Markets are forward-looking, and investors may be anticipating easing uncertainty and growth improvement in 2026. However, tariffs are likely to contribute to rising prices in the U.S. and slower global growth in the coming quarters, though not necessarily a global recession.
Employers added just 73,000 jobs in July, lower than economists expected. Companies are finding it difficult to make forecasts due to Trump's tariff policy, with Walmart, Procter & Gamble, and many others warning about import taxes raising costs, eating into profits, and raising prices for consumers.
The Federal Reserve (Fed) has been cautious about cutting interest rates due to concerns about tariffs adding to inflation and slowing economic growth. The Fed's preferred measure of inflation rose to 2.6% in June from 2.4% in May. The Fed held rates steady at its most recent meeting this week, but the decision belongs to the 12 members of the Federal Open Market Committee.
Fed Chair Jerome Powell has been pressured by Trump to cut the benchmark rate, but the decision is not solely his to make. The Fed's other mandate, along with keeping prices stable, is maximum employment. The Labor Department reported revisions that shaved a total of 258,000 jobs off May and June payrolls, which could prompt a shift in policy.
The yield on the 10-year Treasury fell to 4.21% from 4.39% after the hiring report was released, and the yield on the two-year Treasury, which more closely tracks expectations for Fed actions, plunged to 3.68% from 3.94%. The market's odds of a quarter-point cut by the Federal Reserve rose to around 87% from just under 40% due to the weak hiring numbers.
In summary, while tariffs have created some economic headwinds, U.S. equity markets have shown resilience, likely due to investor expectations for future improvement. The economic effects of tariffs might still materialize with some delay. As for Fed interest rate moves, no specific insights are available from the current search results, so any conclusions would require further up-to-date information beyond these sources.
Finance experts are closely watching the resilience of the U.S. stock market amidst the uncertainties of tariff policies and the Fed's cautious approach on interest rates, knowing that these factors could significantly impact business growth and general news. Moreover, the impact of tariffs on employment and inflation, as well as the Fed's decision on interest rate moves, will be crucial indicators to follow in the realm of politics and economic development.
