U.S. stocks rebound 1.3%-1.8% as weak jobs data fuel Fed cut bets

U.S. stocks rebounded on Monday following a sharp decline triggered by a weaker-than-expected July jobs report. Major indexes like the S&P 500 and Nasdaq Composite saw early gains, with the S&P 500 rising 1.3% and the Nasdaq up 1.8% within the first three hours of trading [1]. The rally came as investors turned to dip-buying amid growing speculation of a near-term Federal Reserve rate cut [3].

The July labor report revealed significant downward revisions to the previous two months’ employment data, with a combined reduction of 258,000 jobs, marking the largest revision since 2020. The report showed just 73,000 new jobs added, far below the expected 104,000, and highlighted a slowdown in the labor market [1]. Despite the weak numbers, the report also boosted expectations for a September rate cut from the Fed, as officials appear increasingly focused on the health of the job market [1].

Federal Reserve Chair Jerome Powell has previously emphasized his focus on the unemployment rate rather than the number of new jobs. The most recent Fed meeting, which saw a decision to hold rates steady, included an unusual double dissent from Governors Christopher Waller and Lisa Cook. Waller argued that the labor market was weaker than it appeared and that a rate cut should not be delayed [1]. The dissent has been interpreted by some as a potential “job application” for the Fed chair role, which will be up for grabs when Powell’s term expires in May 2026 [1].

Adding to the political tension, President Donald Trump fired Erika McEntarfer, the commissioner of the Bureau of Labor Statistics, after the release of the July employment report. The administration accused her of undermining public trust by allegedly manipulating data to show a bias against the Trump administration. The controversy has raised concerns about the reliability of key economic data used by policymakers and businesses [1].

The situation has also sparked worries about the future of the BLS. Earlier in the year, the agency announced a reduction in its data collection efforts for the consumer price index (CPI), citing resource constraints. The move has been seen as potentially complicating the accuracy of inflation data [1]. Analysts have warned that the next BLS commissioner may face pressure to avoid large data revisions, which could lead to delayed or suppressed releases, further eroding trust [1].

The stock market’s response to the report underscores a shift in investor sentiment from macroeconomic uncertainty to company-specific earnings. With the Fed widely expected to act soon to counter slowing growth, investors are increasingly positioning for a rate-cut cycle. Lower interest rates are already supporting risk-on trades, with gold and equities benefiting from the move [1].

However, lingering concerns remain. The weaker labor data not only raised doubts about the strength of the economy but also intensified speculation about the possibility of a recession. As the market continues to digest this information, volatility is expected to persist, especially with the looming tariff deadline and ongoing labor market adjustments [1].

Sources:

[1] title1.....................(https://blockworks.co/news/stocks-higher-after-july-jobs-report-dip)