Financial Markets                      08/01 15:53

   

   The U.S. stock market had its worst day since May on Friday after the 
government reported a sharp slowdown in hiring and President Donald Trump 
imposed sweeping tariffs on imports from a number of U.S. trading partners.

   The S&P 500 fell 1.6%, its biggest decline since May 21 and its fourth 
straight loss. The index also posted a 2.4% loss for the week, marking a sharp 
shift from last week's record-setting streak of gains.

   The Dow Jones Industrial Average fell 1.2%, while the Nasdaq composite fell 
2.2%.

   Worries on Wall Street about a weakening economy were heavily reinforced by 
the latest report on job growth in the U.S. Employers added just 73,000 jobs in 
July. That is sharply lower than economists expected. The Labor Department also 
reported that revisions shaved a stunning 258,000 jobs off May and June 
payrolls.

   Markets also reacted to the latest tariff news. President Donald Trump 
announced tariff rates on dozens of countries and pushed back the scheduled 
effective date to Aug. 7, adding more uncertainty to the global trade picture.

   "The market has been felled by a one-two punch of additional tariffs, as 
well as the weaker-than-expected employment data --- not only for this month, 
but for the downward revisions to the prior months," said Sam Stovall, chief 
investment strategist at CFRA.

   Trump's decision to order the immediate firing of the head of the government 
agency that produces the monthly jobs figures will only fuel the market's 
uncertainty, Stovall added.

   The surprisingly weak hiring numbers led investors to step up their 
expectations for an interest rate cut in September. The market's odds of a 
quarter-point cut by the Federal Reserve rose to around 87% from just under 40% 
a day earlier, according to data from CME FedWatch.

   The question now: Will the Fed's policymakers consider a half-point cut next 
month, or even a quarter-point cut sometime before their next committee 
meeting, Stovall said.

   The yield on the 10-year Treasury fell to 4.21% from 4.39% just before the 
hiring report was released. That's a big move for the bond market. The yield on 
the two-year Treasury, which more closely tracks expectations for Fed actions, 
plunged to 3.68% from 3.94% just prior to the report's release.

   The Fed has held rates steady since December. A cut in rates would give the 
job market and overall economy a boost, but it could also risk fueling 
inflation, which is hovering stubbornly above the central bank's 2% target.

   An update on Thursday for the Fed's preferred measure of inflation showed 
that prices ticked higher in June, rising to 2.6% from 2.4% in May. The Fed has 
remained cautious about cutting interest rates because of worries that tariffs 
will add more fuel to inflation and weigh down economic growth.

   The central bank, though, also counts "maximum employment" as one of its two 
mandates along with keeping prices stable. Issues with either of those goals 
could prompt a shift in policy.

   The Fed held rates steady again at its most recent meeting this week. Fed 
Chair Jerome Powell has been pressured by Trump to cut the benchmark rate, 
though that decision isn't his to make alone, but belongs to the 12 members of 
the Federal Open Market Committee.

   "What had looked like a Teflon labor market showed some scratches this 
morning, as tariffs continue to work their way through the economy," said Ellen 
Zentner, chief economic strategist for Morgan Stanley Wealth Management. "A Fed 
that still appeared hesitant to lower rates may see a clearer path to a 
September cut, especially if data over the next month confirms the trend."

   Businesses, investors and the Fed are all operating under a cloud of 
uncertainty from Trump's tariff policy. The latest moves give 66 countries, the 
European Union, Taiwan and the Falkland Islands another seven days, instead of 
taking effect on Friday, as Trump stated earlier.

   Companies have been warning investors that the policy, with some tariffs 
already in effect while others change or get extended, has made it difficult to 
make forecasts. Walmart, Procter & Gamble and many others have warned about 
import taxes raising costs, eating into profits and raising prices for 
consumers.

   Internet retail giant Amazon fell 8.3%, despite reporting encouraging profit 
and sales for its most recent quarter. Technology behemoth Apple fell 2.5% 
after also beating Wall Street's profit and revenue forecasts. Both companies 
face tougher operating conditions because of tariffs, with Apple forecasting a 
$1.1 billion hit from the fees in the current quarter.

   Exxon Mobil fell 1.8% after reporting that profit dropped to the lowest 
level in four years and sales fell as oil prices slumped as OPEC+ ramped up 
production.

   All told, the S&P 500 fell 101.38 points to 6,238.01. The Dow dropped 542.40 
points to 43,588.58, and the Nasdaq gave up 472.32 points to finish at 
20,650.13.

   Stocks fell across the world. Germany's DAX fell 2.7% and France's CAC 40 
fell 2.9%. South Korea's Kospi tumbled 3.9%

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