(Bloomberg) — Treasuries jumped as weak jobs and manufacturing data bolstered bets on Federal Reserve rate cuts. Stocks extended their weekly slide, with investors also weighing the impacts of President Donald Trump’s sweeping tariffs on the economy.
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US two-year yields plunged 22 basis points to 3.74%, set for the biggest tumble since August 2024. Money markets are now fully pricing in two rate cuts this year, with a 76% chance of the first one coming in September. The dollar sank. The S&P 500 fell 1.4%, with Amazon.com Inc. leading losses in megacaps on an underwhelming profit outlook. Wall Street’s “fear gauge” – the VIX – topped 20.
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Job growth cooled by more than forecast, further evidence that the labor market is shifting into a lower gear amid widespread economic uncertainty. Payrolls increased 73,000 last month after sharp downward revisions to the prior two months. The jobless rate ticked up to 4.2%.
“What had looked like a Teflon labor market showed some scratches this morning,” said Ellen Zentner at 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.”
Separate data showed US factory activity contracted in July at the fastest pace in nine months, dragged down by a faster decline in employment as orders continued to shrink. Meantime, consumer sentiment rose to a five-month high in July on optimism about current conditions tied to a stock-market rally, while inflation expectations eased.
Fed Governors Christopher Waller and Michelle Bowman expressed concerns that policymakers’ hesitance to lower interest rates could risk unnecessary damage to the labor market.
“The debate now is whether the White House was right, and the Fed was too late,” said Scott Helfstein at Global X.” The Fed was probably right to wait, but job growth and the economy is slowing from…
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