Stocks Get Hit as Economic Jitters Fuel Bond Surge: Markets Wrap

To Alexandra Wilson-Elizondo at Goldman Sachs Asset Management, the jobs miss directly challenges the Fed’s hawkish posture from this week’s meeting.

“The burden of proof has shifted and continued labor weakness could force the Fed’s hand despite inflation concerns,” she said.

To Jamie Cox at Harris Financial Group, Fed Chair Jerome Powell might “regret” holding rates steady this week.

“September is a lock for a rate cut and it might even be a 50-basis point move to make up the lost time,” he said.

At eToro, Bret Kenwell says the most-obvious question is: How would the Fed handle a slowdown in the labor market alongside a rise in inflation?

“While neither is at an extreme right now, inflation is moving higher and the labor market is losing steam. When push comes to shove, the Fed would likely step in by easing financial conditions if the labor market truly begins to deteriorate, but it may not be as fast or as accommodating if inflation remains stubbornly high,” he said.

Downward Revisions

To Jeff Roach at LPL Financial, the downward revisions were the most revealing in this month’s job report.

“The monster downward revisions to the past two months inflicts a major blow to the picture of labor market robustness,” said Seema Shah at Principal Asset Management. “With negative impact of tariffs only just starting to be felt, the coming months are likely to see even clearer evidence of a labor market slowdown.”

To Charlie Ripley at Allianz Investment Management, today’s data signals labor market conditions continue to cool and while the softer conditions don’t warrant a warning signal for investors, it should put market participants including the Fed on notice that economic conditions are shifting.

“Friday’s jobs report was weaker than expected, which shows that employers still seem to be sitting on the sidelines amid elevated macro uncertainty,” said Glen Smith at GDS Wealth Management. “The slowdown in job gains has been taking place for several months now and this trend could push the Federal Reserve to cut interest rates as soon as this fall.”

“This is was an ugly report,” said Michael O’Rourke at JonesTrading, adding the Fed should be considering resuming rate cuts next month. “This report is very equity-bearish and bond-bullish.”

Corporate Highlights:

• Amazon.com Inc. projected weaker-than-expected operating income and trailing the sales growth of its cloud rivals, leaving investors searching for signs that the company’s huge investments in artificial intelligence are paying off.

• Apple Inc. reported its fastest quarterly revenue growth in more than three years, easily topping Wall Street estimates, after demand picked up for the iPhone and products in China.

• Exxon Mobil Corp. and Chevron Corp. posted better-than-expected results after record oil production cushioned the impact of lower crude prices.

• Eli Lilly & Co. gained after a report that Medicaid and some Medicare drug plans will experiment with covering expensive weight-loss drugs, a sign the Trump administration is reconsidering its position against expanding coverage of these treatments.

• Moderna Inc.’s cost-cutting efforts failed to assuage investors who are worried about the decline of its Covid vaccine business.

• Kleenex-owner Kimberly-Clark Corp. is making inroads with cost-conscious US consumers, as lower-priced household goods items and surging volume helped it beat second-quarter earnings expectations.

• President Donald Trump is bringing in bank leaders to meet with him one by one at the White House. He’s asking chief executive officers for their pitches on monetizing mortgage giants Fannie Mae and Freddie Mac, including a major public offering of stock, according to people familiar with the matter.

• Days before a new ownership team takes control of the company, Paramount Global reported second-quarter earnings that beat analysts’ estimates, crediting lower costs and growth in streaming profit.

• Coinbase Global Inc., the largest US crypto exchange, reported lower-than-estimated second-quarter revenue amid a drop in digital-asset market volatility.

• Reddit Inc. reported its most profitable quarter to date and projected third-quarter sales that far surpassed analyst expectations, signaling the strength of its growing advertising business.

Some of the main moves in markets:

Stocks

• The S&P 500 fell 1.4% as of 10:29 a.m. New York time

• The Nasdaq 100 fell 1.6%

• The Dow Jones Industrial Average fell 1.2%

• The Stoxx Europe 600 fell 1.8%

• The MSCI World Index fell 1.1%

• Bloomberg Magnificent 7 Total Return Index fell 2.1%

• The Russell 2000 Index fell 2.1%

• Amazon fell 6.4%

• Apple fell 1.2%

Currencies

• The Bloomberg Dollar Spot Index fell 0.8%

• The euro rose 1.3% to $1.1569

• The British pound rose 0.5% to $1.3276

• The Japanese yen rose 1.8% to 148.08 per dollar

Cryptocurrencies

• Bitcoin fell 0.7% to $115,703.14

• Ether fell 2.3% to $3,650

Bonds

• The yield on 10-year Treasuries declined 13 basis points to 4.24%

• Germany’s 10-year yield declined four basis points to 2.66%

• Britain’s 10-year yield declined five basis points to 4.52%

• The yield on 2-year Treasuries declined 22 basis points to 3.74%

• The yield on 30-year Treasuries declined nine basis points to 4.81%

Commodities

• West Texas Intermediate crude fell 2% to $67.90 a barrel

• Spot gold rose 1.7% to $3,346.07 an ounce

–With assistance from Denitsa Tsekova, Vildana Hajric and Julien Ponthus.

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