The S&P 500 Index ($SPX) (SPY) today is down -0.56%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.58%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.25%. September E-mini S&P futures (ESU25) are down -0.49%, and September E-mini Nasdaq futures (NQU25) are down -0.20%.
Stocks today initially rallied after the weak US unemployment report, which solidified market expectations for at least two Fed rate cuts by year-end. However, stocks then turned lower as market sentiment turned negative on concern about weaker US corporate earnings if the US economy is headed towards a recession.
Today’s Aug payroll report of +22,000 was weaker than the consensus of +75,000. Over the past three months, payrolls have shown an average monthly rise of only +29,000. July payrolls were revised slightly higher to +79,000 from +73,000, but June was revised lower to a decline of -13,000. Aug private payrolls rose by only +38,000 while manufacturing payrolls fell by -12,000. The Aug unemployment rate rose by +0.1 point to a 3.75-year high of 4.3%, up from +4.2% in July, which was in line with market expectations.
Aug average hourly earnings rose by +0.3% m/m, which was in line with market expectations. In a positive inflation development, the Aug average hourly earnings report eased to +3.7% y/y from +3.9% in July and was slightly weaker than expectations of +3.8%.
Stocks received underlying support today as the 10-year T-note yield fell -9 bp on the US unemployment report. The markets are now pricing in a 14% chance of a 50 bp rate cut at the upcoming FOMC meeting on Sep 16-17, versus the previous expectations of a zero chance of that 50 bp rate cut. The markets are now discounting a 93% chance of a second -25 bp rate cut at the Oct 28-29 meeting, up from a 54% chance as of late Thursday. The markets are now pricing in an overall -75 bp rate cut in the federal funds rate by year-end to 3.63% from the current 4.38% rate.
Regarding tariffs, a federal appeals court ruled late last Friday that President Trump exceeded his authority by imposing global tariffs without Congressional approval, but the court let the tariffs remain in place while appeals continue. The US Court of Appeals for the Federal Circuit Court said, “The statute bestows significant authority on the President to undertake a number of actions in response to a declared national emergency, but none of these actions explicitly include the power to impose tariffs, duties, or the like, or the power to tax.” The case now appears to be headed to the Supreme Court for a final decision. According to Bloomberg Economics, the average US tariff will rise to 15.2% if rates are implemented as announced, up from 13.3% earlier, and significantly higher than the 2.3% in 2024 before the tariffs were announced.
Overseas stock markets today are mixed. The Euro Stoxx 50 is down -0.80%. China’s Shanghai Composite closed up +1.24%, snapping a 3-session losing streak. Japan’s Nikkei Stock 225 closed up +1.03%.
Interest Rates
December 10-year T-notes (ZNZ5) are up +22.5 ticks. The 10-year T-note yield is down -8.8 bp at 4.072% and posted a 5-month low. T-note prices rallied on the weak US unemployment report and the increased chances for Fed easing. T-note prices are also seeing support from today’s -2.9 bp decline to 2.361% in the 10-year inflation expectations rate, driven by the weak unemployment report and today’s -3% plunge in crude oil prices.
T-note prices today are being driven by the weaker labor market and are ignoring, for the time being, concerns about Fed independence sparked by President Trump’s attempt to fire Fed Governor Cook and by Stephen Miran’s intention to be a Fed Governor while still technically holding his White House job on the Council of Economic Advisors.
European government bond yields are lower. The 10-year German bund yield is down -6.1 bp to 2.659%. 10-year UK gilt yield is down -7.0 bp at 4.650%.
Swaps are discounting the chances at 1% for a -25 bp rate cut by the ECB at the September 11 policy meeting.
US Stock Movers
The Magnificent Seven stocks today are mixed, with four stocks trading higher but three trading lower. Tesla (TSLA) is leading the pack with a +2.8% gain after announcing a pay deal for Elon Musk potentially worth as much as $1 trillion to entice him to show up for work at Tesla and meet aggressive targets. Apple (AAPL) is trading slightly higher after news that its annual fiscal sales in India hit a record of nearly $9 billion. Nvidia (NVDA) is down more than -3% on news that Broadcom is encroaching on its AI chip territory. Microsoft (MSFT) is down more than -2%, and Amazon (AMZN) is down more than -1%.
Broadcom (AVGO) is up more than +9% on an agreement with OpenAI to design and produce a new AI chip, seeking to displace Nvidia’s stronghold. Chip stocks are strong in general today, with gains of more than +3% in ON Semiconductor (ON), Microchip Technology (MCHP), ASML (ASML), and Micron (MU).
Energy stocks are trading lower today due to the -3% sell-off in Oct WTI crude oil on reports that Saudi Arabia wants OPEC+ to speed up the next oil production boost. Diamondback Energy, Devon Energy (DVN), Occidental Petroleum (OXY), ConocoPhillips (COP), and Baker Hughes (BKR) are all down more than -2%.
Crypto stocks are mostly lower today on technical pressure after Bitcoin (^BTCUSD) gave up an early rally and turned mixed. Coinbase (COIN) is down more than -3%, Riot Platforms (RIOT) is down more than -2%, and MARA Holdings (MARA) is down more than -1%.
Homebuilders are trading higher on today’s sharp decline in the 10-year T-note yield, which put downward pressure on mortgage rates. Lennar (LEN) and DR Horton (DHI) are up more than +3%, while PulteGroup (PHM) is up more than +2%, and Toll Brothers (TOL) is up more than +1%.
Lululemon Athletica (LULU) is down more than -18% after reducing its guidance due to a weak consumer environment and tariffs.
Earnings Reports(9/5/2025)
ABM Industries Inc (ABM), C&F Financial Corp (CFFI), Ermenegildo Zegna NV (ZGN), KalVista Pharmaceuticals Inc (KALV), Louisiana-Pacific Corp (LPX), National Beverage Corp (FIZZ), Pathward Financial Inc (CASH), Pro-Dex Inc (PDEX).
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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