Stocks dropped sharply on Friday as disappointing job growth and renewed uncertainty around U.S. trade policy rattled investors. Treasury yields also fell significantly in response.
The S&P 500 sank 1.8%, putting it on course for its biggest single-day loss since late April and likely ending the week in negative territory—a stark contrast to last week’s record-breaking rally. The Dow Jones Industrial Average declined by 641 points, or 1.5%, while the Nasdaq composite fell 2.3%.
Investor concerns about a slowing economy were heightened after the latest U.S. jobs report showed employers added just 73,000 positions in July—far below expectations. Additionally, previous job gains for May and June were revised downward by a combined 258,000.
Further fueling market unease was news that President Donald Trump has adjusted tariffs on dozens of countries and delayed the new effective date to August 7. The last-minute change added to the already murky trade environment, increasing anxiety among businesses and investors.
The weak employment data led to a sharp rise in expectations for a Federal Reserve interest rate cut in September. According to CME FedWatch data, the likelihood of a quarter-point cut jumped to roughly 85%, up from under 40% just the day before.
Bond markets reacted strongly. The yield on the 10-year Treasury fell to 4.23% from 4.39% before the jobs report. The two-year Treasury yield, more sensitive to Fed policy expectations, dropped to 3.71% from 3.94%—a significant shift.
The Fed has kept rates unchanged since December, walking a fine line between supporting the job market and keeping inflation under control. While inflation ticked up to 2.6% in June from 2.4% in May, it remains above the Fed’s 2% target. Tariffs risk pushing inflation higher, complicating the Fed’s policy decisions.
Still, with employment and price stability as dual mandates, the central bank may feel pressure to act if job growth continues to falter. While Fed Chair Jerome Powell has resisted political pressure to lower rates, especially from President Trump, decisions are made collectively by the 12-member Federal Open Market Committee.
Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management, noted that the labor market is beginning to show strain, and if this trend continues, the Fed may see more justification for a rate cut in September.
Companies are also struggling to adapt to the shifting tariff landscape. Businesses like Walmart and Procter & Gamble have warned that tariffs are raising import costs, which may lead to higher prices for consumers and squeeze profit margins.
Major tech companies took a hit Friday. Amazon dropped 8.4% despite strong earnings, and Apple fell 2.7%, even after reporting better-than-expected results. Apple said tariffs could cost the company $1.1 billion this quarter alone.
Energy giant Exxon Mobil declined 2.3% after reporting its lowest quarterly profit in four years. Falling oil prices and increased production from OPEC+ were key factors.
Global markets were also down sharply. Germany’s DAX slid 2.7%, France’s CAC 40 dropped 2.9%, and South Korea’s Kospi plummeted 3.9%.
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