The S&P 500 Index ($SPX) (SPY) Friday closed down -1.60%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -1.23%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -1.96%.  September E-mini S&P futures (ESU25) fell -1.67%, and September E-mini Nasdaq futures (NQU25) fell -2.03%.

Stock indexes plunged on Friday, with the S&P 500 and Nasdaq 100 sliding to 2-week lows and the Dow Jones Industrials falling to a 5-week low.  Stocks retreated on Friday due to concerns that tariffs will curb economic growth, and the decline accelerated after weaker-than-expected US reports on monthly payrolls and manufacturing activity heightened economic concerns and sparked risk-off sentiment in asset markets. 

Late Thursday, Mr. Trump announced a slew of new tariffs, including a 10% global minimum and 15% or higher tariffs for countries with trade surpluses with the US.  Also, Amazon.com dropped more than -8% to weigh on technology stocks after it projected weaker-than-expected Q3 operating income.   

Signs of weakness in the US economy also weighed on stocks after the monthly July payroll report showed US job growth slowed more than expected, and the Jul ISM manufacturing index showed manufacturing activity unexpectedly contracted the most in 9 months.

Stocks fell to their lows Friday on heightened geopolitical tension between the US and Russia after President Trump said the US was moving two nuclear submarines to "appropriate regions" in response to what he called "highly provocative statements" from former Russian President Medvedev.

However, on the positive side, bond yields sank on the weaker-than-expected US economic reports. The 10-year T-note yield fell to a 1-month low of 4.20% as the weaker-than-expected economic reports boosted the chances of a Fed rate cut at the September FOMC meeting to 93% from 40% before the reports were released.

Jul nonfarm payrolls rose by +73,000, weaker than expectations of +104,000, and Jun nonfarm payrolls were revised sharply downward to +14,000 from the previously reported +147,000.  The US Jul unemployment rate rose +0.1 to 4.2%, right on expectations. 

Jul average hourly earnings rose +3.9% y/y, stronger than expectations of +3.8% y/y.

The US Jul ISM manufacturing index unexpectedly fell -1.0 to 48.0, weaker than expectations of an increase to 49.5 and the steepest pace of contraction in 9 months.

US Jun construction spending unexpectedly fell -0.4% m/m, weaker than expectations of no change.

The University of Michigan US Jul consumer sentiment index was revised lower to 61.7 from 61.8, weaker than expectations of an upward revision to 62.0. 

Atlanta Fed President Raphael Bostic said inflation is still further from target than employment, and he's not ready to increase projections for 2025 interest rate cuts.

Cleveland Fed President Beth Hammack said the US labor market still appears healthy, though today's fresh job numbers constituted a "disappointing report to be sure."

In the latest tariff news, President Trump late Thursday raised tariffs on some Canadian goods to 35% from 25% and announced a 10% global minimum and 15% or higher tariffs for countries with trade surpluses with the US, effective after midnight on August 7.  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. 

Federal funds futures prices are discounting the chances for a -25 bp rate cut at 93% at the September 16-17 FOMC meeting and 73% at the following meeting on October 28-29.

This week was the earnings season's busiest week, with 38% of the stocks in the S&P 500 reporting quarterly earnings, double the amount reported last week.  Early results show that S&P 500 earnings are on track to rise +4.5% for the second quarter, better than the pre-season expectations of +2.8% y/y, according to Bloomberg Intelligence.  With over 55% of S&P 500 firms having reported, around 82% exceeded profit estimates. 

Overseas stock markets on Friday settled lower.  The Euro Stoxx 50 plunged to a 3-month low and closed down sharply by -2.90%.  China's Shanghai Composite slid to a 1.50-week low and closed down -0.37%.  Japan's Nikkei Stock 225 closed down -0.66%.

Interest Rates

September 10-year T-notes (ZNU25) Friday closed up sharply by 1-4/32 points.  The 10-year T-note yield fell -15.8 bp to 4.216%.  Sep T-notes recovered from overnight losses and rallied to a 1-month high Friday, and the 10-year T-note yield fell to a 1-month low of 4.200%.  T-notes rallied sharply Friday on signs of weakness in the US labor market after Jul nonfarm payrolls rose less than expected and Jun was revised sharply lower. Also, the weakness in US manufacturing activity was bullish for T-notes after the Jul ISM manufacturing index unexpectedly contracted by the most in 9 months.  Falling inflation expectations also gave T-note prices a lift after the 10-year breakeven inflation rate fell to a 4-week low on Friday of 2.316%.  The weak payrolls and ISM manufacturing reports boosted the chance of a Fed rate cut at next month's FOMC meeting to 93% from 40% before the reports.

T-notes initially moved lower early Friday on inflation risks following President Trump's announcement of new tariffs on all countries with trade surpluses against the US. Also, Friday's payroll report, which showed US Jul average hourly earnings rose more than expected, is hawkish for Fed policy. 

European government bond yields on Friday moved lower.  The 10-year German bund yield fell to a 1-week low of 2.639% and finished down -1.6 bp to 2.679%.  The 10-year UK gilt yield fell to a 4-week low of 4.509% and finished down -4.1 bp to 4.528%.

Eurozone Jul CPI rose +2.0% y/y, stronger than expectations of +1.9% y/y.  Jul core CPI rose +2.3% y/y, right on expectations. 

The German Jul S&P manufacturing PMI was revised downward by 0.1 to 49.1 from the previously reported 49.2.

The UK Jul S&P manufacturing PMI was revised downward by -0.2 to 48.0 from the previously reported 48.2.

Swaps are discounting the chances at 14% for a -25 bp rate cut by the ECB at the September 11 policy meeting.

US Stock Movers

Amazon.com (AMZN) closed down more than -8% to lead losers in the Dow Jones Industrials and Nasdaq 100 after forecasting Q3 operating income of $15.5 billion-$20.5 billion, the midpoint below the consensus of $19.42 billion.

Chip stocks are under pressure today, weighing on the overall market.  Marvell Technology (MRVL) closed down more than -6% and Micron Technology (MU) closed down more than -4%.  Also, Nvidia (NVDA), Advanced Micro Devices (AMD), GlobalFoundries (GFS), Intel (INTC), and ARM Holdings Plc (ARM) closed down more than -2%.  In addition, Broadcom (AVGO), Microchip Technology (MCHP), and NXP Semiconductors NV (NXPI) closed down more than -1%. 

Fluor (FLR) closed down more than -27% after reporting Q2 adjusted EPS of 43 cents, weaker than the consensus of 56 cents, and cutting its full-year adjusted EPS forecast to $1.95-$2.15 from a previous estimate of $2.25-$2.75, well below the consensus of $2.53. 

Eastman Chemical (EMN) closed down more than -19% to lead losers in the S&P 500 after reporting Q2 adjusted EPS of $1.60, weaker than the consensus of $1.74. 

Coinbase Global (COIN) closed down more than -16% after reporting Q2 total revenue of $1.50 billion, below the consensus of $1.59 billion. 

WW Grainger (GWW) closed down more than -10% after reporting Q2 adjusted EPS of $9.97, below the consensus of $10.06, and cutting its full-year adjusted EPS forecast to $38.50-$40.25 from a previous forecast of $39.00-$41.50.

Moderna (MRNA) closed down more than -6% after narrowing its full-year revenue forecast to $1.5 billion to $2.2 billion from a previous forecast of $1.5 billion to $2.5 billion, weaker than the consensus of $2.07 billion.

Avis Budget Group (CAR) closed down more than -3% after Goldman Sachs downgraded the stock to sell from neutral with a price target of $105.

Reddit (RDDT) closed up more than +17% after reporting Q2 revenue of $499.6 million, stronger than the consensus of $425.3 million, and forecasting Q3 revenue of $535 million-$545 million, well above the consensus of $472.7 million.

Homebuilding stocks rallied Friday after the 10-year T-note yield fell to a 1-month low, a supportive factor for housing demand.  DR Horton (DHI) closed up more than +5%, Lennar (LEN) and PulteGroup (PHM) closed up more than +3%, and Toll Brothers (TOL) closed up more than +2%.  

Monolithic Power Systems (MPWR) closed up more than +10% to lead gainers in the S&P 500 after reporting Q2 adjusted EPS of $4.21, stronger than the consensus of $4.12. 

Kimberly-Clark (KMB) closed up more than +4% after reporting Q2 adjusted EPS of $1.92, above the consensus of $1.68. 

ResMed (RMD) closed up more than 2% after reporting Q4 adjusted EPS of $2.55, better than the consensus of $2.49.

Eli Lilly (LLY) closed up more than +2% after the Washington Post reported that the US government plans to experiment with covering weight-loss drugs for federal health programs. 

Earnings Reports (8/4/2025)

Axon Enterprise Inc (AXON), Coterra Energy Inc (CTRA), Diamondback Energy Inc (FANG), Equity Residential (EQR), IDEXX Laboratories Inc (IDXX), Loews Corp (L), ON Semiconductor Corp (ON), ONEOK Inc (OKE), Palantir Technologies Inc (PLTR), SBA Communications Corp (SBAC), Simon Property Group Inc (SPG), Tyson Foods Inc (TSN), Vertex Pharmaceuticals Inc (VRTX), Waters Corp (WAT), Williams Cos Inc/The (WMB).