A weaker-than-expected July jobs report sent the S&P 500 tumbling to its steepest intraday loss in more than two months on Friday.
The bleak data, which showed downward revisions for May and June, suggested a sharp deterioration in the labor market and allowed traders to bet on multiple rate cuts this year.
According to the CME FedWatch tool, traders now see an 87.5% chance of a September rate cut, up from just 63.1% a week ago. For the year, markets are betting on at least two quarter-point cuts, about 60 basis points.
The central bank’s decision to keep rates unchanged last week drew immediate criticism from President Donald Trump, who has repeatedly threatened to fire Chairperson, Jerome Powell, arguing that rates should be much lower than they are.
Further underscoring uncertainty, the surprise resignation of Fed Governor, Adriana Kugler could allow Trump to reshape the central bank’s leadership to better align with his policy views.
“If we get to a point where Jerome Powell was pushed out earlier than he’s expected to go anywhere, that is going to unsettle markets, and that is possibly the pill that they won’t swallow,” said Danni Hewson, head of financial analysis at AJ Bell.
Meanwhile, sentiment was also strained after Trump signed executive orders slapping fresh import duties on countries like Canada, Brazil, India, and Taiwan despite their efforts to negotiate better terms.
–Reuters–
