The U.S. stock market experienced a significant downturn in afternoon trading on Friday, August 1st, 2025, as investors reacted negatively to a much weaker-than-expected jobs report and renewed concerns over escalating tariffs. The broad market sell-off marked a sharp shift in sentiment, with major indexes recording substantial losses and bond yields plummeting as expectations for a Federal Reserve interest rate cut in September intensified.
Market Indexes in the Red
All major U.S. market indexes were firmly in the red as afternoon trading progressed. The S&P 500 (SPX) fell 1.8%, marking its steepest decline since June and putting it on track for a weekly loss following last week's record-setting streak. The Dow Jones Industrial Average (DJI) dropped 1.5%, shedding over 650 points. Meanwhile, the tech-heavy Nasdaq Composite (IXIC) saw the steepest decline, sliding 2.5%. This widespread decline signals a notable shift from the strong gains observed in July, which were fueled by optimism surrounding corporate earnings and economic data.
The primary catalyst for today's market slump was the latest U.S. job growth report. The Labor Department announced that employers added a mere 73,000 jobs in July, a figure significantly below economists' expectations. Compounding the concern, revisions to May and June payrolls shaved a stunning 258,000 jobs off previous estimates, indicating a labor market that is weaker than previously understood. The unemployment rate also ticked up to 4.2%. This "worst major economic report in the post-pandemic era" has led to a robust discussion about the Federal Reserve's next steps.
Adding to the market's woes were fresh developments on the tariff front. President Donald Trump announced an immediate 35% tariff rate on imports from Canada, with other punishing import taxes set to take effect on August 7th for a long list of countries that have yet to strike trade deals with the U.S. This re-ignited concerns about potential economic headwinds and the impact on global trade, which had somewhat subsided in recent weeks.
Economic Data Fuels Rate Cut Hopes
The surprisingly weak hiring numbers have significantly altered market expectations regarding the Federal Reserve's monetary policy. Traders are now heavily betting on an interest rate cut in September, with an 80.9% chance of a quarter-point rate cut at that meeting, a sharp increase from just under 38% a day earlier. While the Fed held rates steady at its most recent meeting this week, the central bank's dual mandate includes "maximum employment," and the latest jobs data could prompt a shift in policy.
In the fixed-income markets, U.S. Treasury yields tumbled as investors rushed to the safety of bonds. The yield on the 10-year Treasury (US10Y) fell 15 basis points to 4.23% from 4.39% just before the hiring report was released. Similarly, the yield on the two-year Treasury (US2Y), which is more sensitive to Federal Reserve actions, plunged 24 basis points to 3.72% from 3.94%. This substantial move in the bond market underscores the increased conviction among investors that the Fed may need to act to bolster a weakening job market.
Corporate Earnings and Company News
The afternoon trading session saw many major public companies under pressure, particularly in the technology sector, despite a busy week of quarterly earnings reports. Internet retail giant Amazon (AMZN) fell 7.7%, with some reports indicating drops as high as 9%, despite reporting encouraging profit and sales for its most recent quarter. The decline was attributed to a disappointing Q3 outlook and concerns over significant spending on AI and the impact of tariffs. Technology behemoth Apple (AAPL) also saw its shares fall 1.8%, giving up earlier gains, even after beating Wall Street's profit and revenue forecasts, as it faces tougher operating conditions due to tariffs.
Other prominent tech stocks also experienced declines, with Nvidia (NVDA) and Meta Platforms (META) each down 3%. Microsoft (MSFT), Alphabet (GOOGL), Broadcom (AVGO), and Tesla (TSLA) all fell approximately 2%. This broad weakness in mega-cap technology stocks contributed significantly to the overall market downturn.
Outside of tech, Exxon Mobil (XOM) fell 1.7% after reporting that its profit dropped to the lowest level in four years, and sales declined as oil prices slumped due to increased OPEC+ production.
However, there were some individual stock bright spots. First Solar (FSLR) was one of the best-performing stocks in the S&P 500, jumping after the company posted stronger-than-expected earnings and raised its 2025 sales outlook. In a significant corporate announcement, Union Pacific Corp. (UNP) agreed to acquire Norfolk Southern Corp. (NSC) for $85 billion. Reddit (RDDT) also saw its stock soar after its earnings report. On the Canadian exchange, GFL Environmental (GFL) climbed almost 6% following upbeat second-quarter results and raised full-year guidance, while Bausch Health (BHC) dived nearly 8% despite revenue and EBITDA increases, due to concerns about rising costs and a revenue decline in a diversified segment.
Sector performance on Friday was largely negative, with tech shares being the worst-hit. Healthcare, real estate investment trusts (REITs), financials, and consumer staples also saw significant declines. The only sector that managed to escape the sell-off and post gains was utilities shares.
Looking Ahead: Key Events on the Horizon
As August begins, investors will continue to monitor several key market events. The August 7th deadline for new tariffs to take effect for countries without trade deals will remain a significant point of focus, as further trade announcements are anticipated. The market will also be closely watching for any further indications from the Federal Reserve regarding a potential September rate cut, especially given the recent weak jobs data.
Beyond tariffs and monetary policy, August's economic calendar includes several important data announcements that could influence market direction. These include various Purchasing Managers' Index (PMI) reports, unemployment claims, and consumer sentiment data. While the peak of the earnings season for major tech companies has passed, other companies will continue to release their quarterly results throughout the month, providing further insights into corporate health and economic trends. The annual Jackson Hole Symposium later in August will also be closely watched for any signals from central bankers.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.