[U.S. Stocks] The Shock of the July U.S. Employment Statistics on the Market - The Moment of Psychological Shift for the S&P 500 | Heihachiro Okamoto's Path to Mastering U.S. Stocks | Moneyクリ Money Group's Investment Information and Media Useful for Money

In a month of news overload, the U.S. stock market has remained strong in July.

July 2025 saw a concentration of corporate earnings reports for the second quarter, along with important economic indicators and the Federal Reserve's policy meetings, resulting in a month that felt like a flood of information for market participants. Despite this, the stock market overall remained robust, with the S&P 500 rising by 2.2% and the Nasdaq 100 by 2.4% for the month, concluding with stable results.

Towards the end of July, positive signs were observed in the US-China trade negotiations, and major tech companies such as Alphabet [GOOGL], Meta Platforms [META], and Microsoft [MSFT] showed robust demand and favorable performance outlooks in the AI and data center sectors, which boosted investor sentiment.

The US Employment Statistics in July That Shattered Optimism

The U.S. employment statistics for July, announced at 8:30 AM (NY time) on August 1 (Friday), doused cold water on the market. The number of non-farm payrolls increased by 73,000, falling short of the expected 100,000. Furthermore, the job increases for May and June were revised down by a total of 258,000, suggesting that the labor market is in a tougher situation than initially thought.

The actual three-month average has decreased to about 35,000 people, which is considered the weakest level since the onset of the COVID-19 pandemic. Additionally, the unemployment rate has risen to 4.2%, marking the highest level since 2021. In response, the market turned downward throughout the week, with the S&P 500 falling by 2.4% and the Nasdaq 100 by 2.2%. Expectations for a "soft landing" have wavered, raising concerns that "this may be a sign of a recession."

President Trump's Unusual Response Pressures the Market

Additionally, what further unsettled market sentiment was the sudden decision made by President Trump right after the statistical announcement. On August 1, the President took the unusual step of dismissing the director of the Bureau of Labor Statistics (BLS), Ericka McKintosh. President Trump claimed, without providing evidence, that "the numbers this time are wrong" and accused the statistics of being manipulated. This action, known as "shooting the messenger," further exacerbated investors' anxiety.

On the same day, US President Trump announced a rise in tariffs that exceeded expectations against multiple countries. The targeted countries were wide-ranging, and the tariff rates were high. Although there were some exceptions, the market's reaction was immediately negative. S&P 500 futures dropped nearly 1% during the night in Japan, indicating a stronger risk-off sentiment. Additionally, expectations for a market rebound through a "TACO trade" (the Trump administration often backs down) after the tariff announcement were shattered, leading to a prevailing view that "this time it's serious."

The FRB's Steering and the Next Focus Material. Uncertainty Resurfaces

On July 30 (Wednesday), there was the FOMC (Federal Open Market Committee) meeting of the Federal Reserve. The Fed decided to keep interest rates unchanged, but if the employment statistics had been released before the meeting on August 1 (Friday), the outcome might have been different. Following the results of this employment report, the market is rapidly increasing the view that "there may be a rate cut in September."

The FRB has two missions: "price stability" and "maximum employment." This time, while the weakness in employment has become apparent, the inflation outlook remains uncertain. Additionally, the possibility that new tariffs could affect inflation means that the FRB is forced to navigate extremely difficult waters. As a result of multiple event risks overlapping, uncertainty has emerged in the market once again.

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