Stock market posts worst week in months on renewed economic fears
The S&P 500 ended the day down 1.6%, capping one of the index's worst weeks since Trump wrought chaos across the global trading system when he unveiled his first round of steep tariffs in April. The benchmark fell 2.4% for the week.
On Friday, investors parsed through the president's latest tariff plans and how they might further drive up costs for companies and consumers. But it was a report from the Labor Department that caused the most alarm.
U.S. employers added 73,000 jobs in July, fewer than the roughly 100,000 that economists had expected, and the unemployment rate rose slightly. The report also revised down the data on hiring from May and June by a combined 258,000 jobs, suggesting the labor market was under greater strain than initially believed.
The weaker-than-expected hiring data, particularly the large downward revisions for May and June, raised concerns about the strength of the economy under Trump and created new uncertainty about the timing of the Federal Reserve's next interest rate cut.
With the stock market swooning and his critics raising new questions about the efficacy of his economic policies, Trump took the extraordinary step of publicly calling into the question the veracity of the hiring data. In a social media post Friday afternoon, he blamed, without evidence, a Biden administration appointee in the Bureau of Labor Statistics for producing faulty numbers.
Trump's charge did little to soothe investors' concerns about the economy, however, as the market remained lower throughout the afternoon.
'This is the first eye-opening bad number,' said Mark Hackett, chief market strategist at Nationwide. 'It's a reminder that volatility still exists.'
Investors had been 'lulled into a sense of complacency' over the past few months as stocks surged, Hackett added. The market rally was headed for a pause, he said, but 'the payroll number really changes the conversation.'
As recently as Wednesday, Jerome Powell, the Fed chair, described the labor market as 'solid' when explaining the central bank's decision to keep holding interest rates steady.
For Wall Street, the data Friday cast fresh skepticism on that assessment.
The yield on 10-year Treasury bonds slid more than a tenth of a percentage point, a large move in that market that reflected expectations for lower rates. (Yields move inversely to prices.) The dollar also dropped sharply against other major currencies.
Traders' bets on a September rate cut rose to more than 90% Friday, up from roughly 40% the day before, according to CME FedWatch.
The Trump administration also seized on the weak hiring numbers to continue to hammer Powell to cut rates soon, to jolt economic growth. Posting on social media, Trump said Powell should 'substantially' lower rates. If he doesn't, the Fed board should 'assume control,' the president said.
Friday's losses were steepest in the technology-heavy Nasdaq Composite index, which fell 2.2%. Stocks in Asia and Europe also lost ground Friday.
The declines put a damper on a weekslong rally, supported by solid corporate earnings from many major technology companies. But the downward shift Friday -- the fourth consecutive daily drop for the S&P 500 -- echoed Wall Street's tariff-induced meltdown in April.
Back then, rounds of selling pushed the index to the brink of a bear market, before Trump paused his most punitive tariffs. By late June, the S&P 500 had surged to a record high and regained all the ground it lost in March and early April.
Analysts have noted that market declines fueled by fears of tariffs have tended to give way to rallies, as deadlines were extended or altered. But now that steeper tariffs are set to take effect Thursday, a renewed escalation of Trump's global trade war -- coupled with signs of weakness in the economy -- is injecting volatility into financial markets again.
'It's kind of a warning sign about where the economy might be headed,' said Greg McBride, chief financial analyst at Bankrate. 'The labor market is not nearly on a solid footing as we had thought.'
This article originally appeared in The New York Times.
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