July Set Records for the Stock Market, but August Is Starting Poorly
Stocks trended low on Friday and could continue low on Monday due to new tariffs and a disappointing jobs report.
Quick overview
- The stock market closed Friday with major indices down 1-2%, marking a poor start to August after July's highs.
- The Dow Jones fell 1.23%, the S&P 500 dropped 1.60%, and the Nasdaq experienced the largest decline at 2.23%.
- July's nonfarm payrolls report revealed only 73,000 new jobs created, with unemployment rising to 4.2%, indicating economic contraction.
- New tariffs implemented on August 1st are contributing to market declines, although potential negotiations could lead to improvements.
As Friday trading closed off, the stock market trended very low, with losses of 1-2% for all major stock indices. This was an inauspicious start for the month after July’s all-time highs.
The Dow Jones dropped 1.23% on Friday before trading finished, and the S&P 500 fell 1.60%. The Nasdaq, with its technology stock focus, fell the hardest, though, losing 2.23% on Friday.
Nonfarm payrolls released for July on Friday, offering a damning look at the economy. The labor force is diminishing while unemployment is on the rise. Unemployment climbed 4.2%, up from the previous month’s 4.1%. The estimates for job creation for the month were higher than the actual numbers, indicating a shrinking economy that is worse than the anticipated results.
The three month average for unemployment is 150,000, with job creation for the three months at 80,000. The fact that unemployment is outpacing new jobs is bad news, and it is no wonder the stock market reacted as it did. For the month of July, there were only 73,000 new nonfarm jobs created. Those were all within the same industry- Health & Social Assistance.
Does this mean the Federal Reserve will issue a rate cut for September? That still seems unlikely at this point. Chairman Powell spoke earlier last week about not enacting any new rate cuts for now, although two are potentially scheduled for the remainder of the year.
Tariffs Trouble the Market
It is obvious that Donald Trump’s new wide-ranging tariffs are affecting the stock market, despite indifference to them earlier in July. As of August 1st, a number of tariffs are going into effect with duties that range from 10% to 41%.
Trump said that countries could still make a deal to lower the tariffs he was issuing but that they would still be enacted up until the moment those countries reach out and try to negotiate. He is open to talks from any country willing to discuss the tariffs with him, so even though the tariff situation looks bad now, it could improve over the next few weeks as talks begin between the United States and other countries.
As new tariffs took effect on Friday, the overall stock market trended downward and experienced its biggest drop all week. What does this mean for Monday’s stock market opening? We could see a minor upswing as the market corrects, but we anticipate that the tariffs and the poor jobs report will keep the market subdued as the week begins.
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