U.S. stocks faced a sharp pullback last week following weaker-than-expected hiring data and the announcement of new tariffs by the United States. The S&P 500, which had notched record highs for six straight sessions the week prior, saw its worst single-day drop since May on Friday. All major benchmark indexes closed the week in negative territory. The disappointing jobs report sparked renewed concerns over slowing economic growth and added fuel to expectations of a Federal Reserve rate cut in September. Additionally, new tariffs targeting several U.S. trade partners heightened inflation fears, further dampening stock trader sentiment. Treasury yields fell significantly, with the 10-year yield reaching its lowest level since April. Meanwhile, crude oil prices rose, although speculation around potential OPEC+ production increases may put downward pressure on prices in the weeks ahead.
Last Week’s Economic News
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The Federal Reserve held interest rates steady at 4.25%–4.50% last week. The FOMC acknowledged moderating economic activity in the first half of 2025, while also citing uncertainty around the outlook. Labor market conditions remained solid, although inflation was still somewhat elevated.
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The U.S. economy added just 73,000 jobs in July—well below expectations. The unemployment rate stands at 4.2%. Average hourly earnings rose for the month and to almost 4% over the past year.
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GDP rebounded in Q2, growing at an annualized rate of 3.0% after contracting 0.5% in Q1. The rebound was largely due to a sharp drop in imports and modest gains in consumer spending.
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Consumer spending rose slightly in June, while both headline and core prices also climbed a bit. Personal income and disposable income each increased by the same amount.
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The U.S. trade deficit in goods narrowed to $86.0 billion in June, driven by a 4.2% drop in imports. Exports slipped slightly but were still up year-over-year.
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Job openings declined to 7.4 million in June, with fewer hires and separations than in May. Labor market churn appears to be slowing, in line with weakening demand.
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The manufacturing sector weakened in July, with the S&P Global U.S. Manufacturing PMI falling to 49.8—its first contraction in 2025. Ongoing tariff uncertainty, falling international sales, and rising input costs all contributed to the pullback.
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Gasoline prices rose slightly to $3.123 per gallon nationally. Unemployment claims remained stable, with 218,000 new claims and 1.946 million continuing claims.
Eye on the Week Ahead
This week is relatively quiet for economic releases. Investors will be looking ahead to next week’s inflation data for clues about the Fed’s next move.
Have a nice week!
Sincerely,
Robert G. Carpenter