Markets slip after dismal payroll data sparks recession fears, while Trump’s Section 301 threat adds geopolitical tension to the economic uncertainty.
Job Growth Stalls, Market Sentiment Sours
Friday began with early gains in both the S&P 500 ETF (SPY) and Nasdaq 100 ETF (QQQ). But momentum faded after the August nonfarm payrolls report revealed only 22,000 new jobs—a major miss versus the 75,000 estimate.
- Worse still, the Bureau of Labor Statistics (BLS) revised June’s payrolls down by 27,000, turning it into a 13,000-job loss. This broke a 53-month streak of job creation.
- The unemployment rate rose slightly to 4.3%, aligning with forecasts but marking the highest level since October 2021.
- This suggests a softening labor market, reinforcing concerns that the economy is losing steam.
Fed Rate Cut Expectations Surge
In response to the weak report, market expectations for a Federal Reserve rate cut at the upcoming September 16-17 FOMC meeting surged.
- Traders now see a 90% chance of a 25 basis point cut, and a 10% chance of a 50 basis point cut—a possibility that had previously been priced at 0%.
- Fitch Ratings’ Olu Sonola called the jobs data a “louder warning bell,” suggesting a rate cut is now almost certain.
This shift in rate outlook reflects the Fed’s growing challenge: stimulate a weakening economy without triggering inflation’s return.
Trump Threatens Trade Action Over EU’s Google Fine
Further unsettling markets was President Trump’s reaction to the European Union’s $3.45 billion antitrust fine against Google for anti-competitive behavior in digital advertising.
- Trump criticized the EU on Truth Social, threatening to initiate a Section 301 investigation—a legal tool that could pave the way for retaliatory tariffs.
- A Section 301 action allows the U.S. Trade Representative to penalize foreign governments for unfair trade practices impacting U.S. companies.
Trump’s warning reflects rising geopolitical and trade tensions, which could destabilize U.S.-EU economic relations and affect the tech sector broadly.
Should Investors Buy the Dip?
Amid the chaos, Goldman Sachs macro trader Eric Sheridan encouraged investors to consider buying the September dip.
- Sheridan argues that a new rate-cut cycle could revitalize growth, predicting the federal funds rate could drop to 3%.
- He maintains a bullish long-term view, forecasting the S&P 500 (SPX) could climb to 6,700–6,900 if macroeconomic data holds up.
However, he cautions that the market’s path upward depends on data strength and policy execution in the coming months.
Market Close Summary
- S&P 500 (SPX): -0.32%
- Nasdaq 100 (NDX): +0.08%
Despite the initial optimism, a combination of weak jobs data, rising unemployment, and Trump’s Section 301 threat weighed heavily on broader market sentiment.
