U.S. Stocks Plunge 1.44%-2.33% as Weak Jobs Data and Trump Tariffs Spur Rate Cut Hopes

U.S. stock markets plunged on August 1, 2025, as a weak July jobs report and rising trade policy uncertainty spooked investors. The Dow Jones Industrial Average fell 633.77 points, or 1.44%, to close at 43,491.55, while the S&P 500 dropped 1.70% and the Nasdaq Composite slid 2.33% [1]. The sharp decline followed a disappointing jobs report that showed only 73,000 new jobs were added in July, far below the expected 110,000 [2]. The unemployment rate rose to 4.2%, signaling a weakening labor market [3].

The report also revealed a downward revision of 258,000 jobs from May and June, amplifying concerns about the economy’s trajectory [4]. These developments increased the likelihood of a Federal Reserve rate cut. Money market pricing now reflects an 86.2% probability of a September rate cut, up from 39.5% just a day earlier [5]. The Fed’s dual mandate of maintaining low inflation and high employment faces pressure as trade tensions and tariffs, particularly those imposed by President Donald Trump, continue to weigh on business activity [6].

Trade policy uncertainty has been a major contributor to the economic slowdown. Trump’s recent tariffs on key trading partners like Canada, Brazil, and India have created uncertainty for businesses and consumers [13]. Analysts have highlighted that these policies risk triggering retaliatory measures and long-term damage to U.S. trade relations, particularly in Europe [14]. Thomas Ryan of Capital Economics described the July jobs figures as “troublingly low” and warned that the labor market appeared to be stalling [7].

The manufacturing sector has been particularly hard hit, with employment contracting for the fifth consecutive month. The sector lost 11,000 jobs in July alone and a total of 37,000 in the past three months [8]. Federal government employment also dropped sharply, with 12,000 jobs lost in July and 84,000 since January 2025 [9]. These trends have raised concerns that the Fed may be forced to cut interest rates sooner than expected to stabilize the labor market [4].

Investor sentiment was further weakened by geopolitical and economic concerns. Global markets, including the Stoxx 600, FTSE 100, DAX, and CAC 40, all declined as investors braced for the consequences of Trump’s trade policies [10]. In the U.S., the two-year Treasury yield dropped 22 basis points to 3.74%, reflecting increased expectations for rate cuts [11].

Trump continued to criticize Federal Reserve Chair Jerome Powell, calling him a “stubborn MORON” and demanding immediate action to lower interest rates [12]. However, not all analysts agree that a rate cut is imminent. Atakan Bakiskan of Berenberg noted that the labor market remains “slow to hire but slow to fire” and suggested the Fed might keep rates steady [15]. Others, like Ellen Zentner of Morgan Stanley, argue that signs of labor market deterioration may force the Fed to respond sooner rather than later [16].

The trade war’s impact extended beyond the U.S., with global investors reevaluating their exposure to markets affected by U.S. tariffs. Switzerland, for example, expressed disappointment over the 39% tariff imposed on its exports, having expected a negotiated agreement [17]. The country’s pharmaceutical sector, a key export, could face additional scrutiny under Trump’s broader efforts to reduce drug prices [18].

As the market continues to react to the evolving economic and trade landscape, investors are closely watching for any further signals from the Federal Reserve. The growing possibility of a rate cut, combined with ongoing trade uncertainty, is expected to keep volatility high in the coming months.

Source:

[1] Crypto - https://crypto.news/dow-jones-down-600-points-as-rate-cuts-odds-surge-on-hiring-slump/

[2] The - https://www.wsj.com/livecoverage/jobs-report-today-stock-market-08-01-2025?gaa_at=eafs&gaa_n=ASWzDAjNk5Rj2Q8lPe4dw9dw7obeusSLhywX_BMeRePSQgk4iGczRk5noCuf&gaa_sig=sQDlrSLdm2UsXV87z7OONxjF7NlH9cgQOHFWr4Pae72btYu5JPAIK4uFGe2F2tAACGcY2pt50R3t2dAbmBKNkg%3D%3D&gaa_ts=688d0c5b

[3] Investor's - https://www.investors.com/news/economy/jobs-report-july-fed-rate-cut-trump-tariffs-sp-500/

[4] Yahoo - https://finance.yahoo.com/news/live/stock-market-today-dow-sp-500-nasdaq-futures-slump-after-weak-jobs-report-trumps-tariff-redux-123818857.html

[5] Bloomberg.com - https://www.bloomberg.com/news/articles/2025-07-31/asian-stocks-to-slip-as-tariff-deadline-sours-mood-markets-wrap

[6] Mint - https://www.livemint.com/market/stock-market-news/wall-street-live-nasdaq-s-p-500-dow-jones-slump-after-weak-jobs-data-1175****769640.html

[9] Mitrade - https://www.mitrade.com/au/insights/news/live-news/article-3-1006261-20250802

[10] Economic Times - https://m.economictimes.com/markets/stocks/news/us-stocks-slide-at-open-on-trump-tariffs-amazon-results-soft-payrolls/articleshow/123045467.cms

[17] Swiss Government - https://twitter.com/BR_Sprecher/status/130****789012345678