The U.S. economy shed roughly 23,000 jobs in July, a sharp reversal from the modest hiring gains economists had forecast, according to Friday's Labor Department report. Wall Street read the weak numbers as reducing the odds that the Federal Reserve will raise interest rates in the coming months, and stocks rallied hard into the weekend. The S&P 500 closed at a record high on Friday, capping its best week since April, while a wave of strong technology earnings — led by chipmakers Nvidia and Intel — pushed the Nasdaq Composite to an even steeper weekly gain.
Economists surveyed by Bloomberg had expected payrolls to grow by roughly 80,000 in July. Instead the headline print came in negative, and the government revised down its estimates for May and June by a combined 103,000 jobs, according to CNBC's coverage of the report, suggesting the labor market had already been cooling faster than initially reported. The unemployment rate ticked down slightly to 4.1%, a figure economists said reflected workers leaving the labor force as much as new hiring.
Bad News, Good Trade
The reaction on trading desks captured a market still wagering that a softening labor market outweighs any near-term inflation risk. Fed funds futures showed the probability that the central bank holds rates steady at its September meeting jumping to roughly 56%, up from about 45% a day earlier, while the odds of a quarter-point rate increase fell to around 44%.
The labor market is stalling again.
Heather Long, chief economist, Navy Federal Credit Union
Long, writing after the report's release, called the underlying data bleak, noting that wage growth had slowed to 3.2% year-over-year — the weakest pace in five years — and that more than two million workers have left the labor force since November. Charlie Ripley, an investment strategist at Allianz, said the size of the payroll miss suggested the labor market "may be losing momentum and can no longer be considered the pillar of strength" for the broader economy.
Chips Lead the Charge
The S&P 500 rose 0.6% on Friday to close at 7,757.64, a record, finishing a week in which the benchmark index gained roughly 3.5%. The Nasdaq Composite jumped 1.3% on the day and about 5% for the week, according to a Yahoo Finance market wrap, while the Dow Jones Industrial Average added 0.3% Friday to close at 54,036.93.
Semiconductor stocks did much of the lifting. Nvidia climbed roughly 11.6% over the five trading days, buoyed in part by SpaceX's disclosure that it would lean on Nvidia hardware for its artificial-intelligence buildout. Intel's rally was even sharper: shares jumped about 12.7% on the week to close at $101.65, adding an estimated $58 billion to the chipmaker's market value, according to an analysis from ts2.tech, as investors cheered a second-quarter earnings beat and renewed optimism about its AI-related business. Some analysts flagged that much of Intel's advance came in a single session, with thin trading volume raising questions about how durable the rally will prove.
The chip rally landed in the middle of a broader Big Tech earnings season that has, so far, come in stronger than Wall Street expected. Several of the largest technology companies beat both revenue and profit estimates in their latest quarters, and investors have rewarded even modest upside surprises with outsized share-price moves — a dynamic that amplified Friday's gains once the jobs report gave traders an added reason to buy. Bond yields fell alongside the rate-hike repricing, a move that typically makes richly valued growth stocks, including chipmakers, more attractive relative to fixed income.
Together, the jobs data and the earnings beats reinforced a pattern that has defined markets for much of the year: soft economic data, rather than spooking investors, has instead been treated as evidence the Fed has room to stay patient — even as some economists warn that a genuinely weakening labor market carries its own risks for consumer spending and corporate profits heading into the fall. Ripley's caution about the labor market losing its footing was echoed by other strategists who noted that a single soft report, however dramatic, is not yet proof of a broader downturn — and that the Fed's next move will hinge on how August's data, and the inflation readings due before the September meeting, come in.
