Fed Stays Put On Rates, But Jobs Report Signals It May Regret It: This Week In Markets
The Federal Reserve didn't cave to pressure from President Donald Trump and held interest rates steady in its July meeting — one that, for the first time in over 30 years, saw two dissenting votes from board members pushing for an immediate cut.
But that decision may now backfire, as Friday's labor market data showed early signs of weakness.
July’s payroll growth was deeply disappointing, with just 73,000 jobs added — far short of the expected 110,000. Even more troubling were the massive downward revisions to May and June figures, slashing previously reported job gains by a combined 258,000.
On the inflation front, things aren't going the Fed's way either. The Personal Consumption Expenditures (PCE) price index jumped to 2.6% year-over-year in June from 2.3% in May, beating the 2.5% forecast. Excluding food and energy, the Fed's preferred inflation gauge held steady at 2.8%, above both expectations of 2.7% and the Fed's 2% target.
Despite a solid 3% second-quarter economic expansion — boosted by a collapse in imports — the spotlight is shifting back to the growing negative risks from tariffs.
After nearly four months of relentless gains, Wall Street took a step back, with major indexes finishing the week lower despite solid quarterly results from tech heavyweights Meta Platforms Inc. (NASDAQ:META), Apple Inc. (NASDAQ:AAPL) and Microsoft Corp. (NYSE:MSFT) — signaling that macroeconomic worries have reclaimed the driver's seat.
On the trade front, in addition to deals inked with the U.K., Japan and South Korea, Trump signed a sweeping new pact with the European Union. The deal introduces 15% tariffs while securing hundreds of billions in energy and defense investments and purchases from Brussels.
But most other trade actions reveal a harsher stance than anticipated, with 25% tariffs imposed on India, 39% on Switzerland, 20% on Taiwan, 30% on South Africa, 35% on Canadian goods and a steep 50% on imports from Brazil.
Trump also issued a new 10-day ultimatum to Russia: agree to a ceasefire with Ukraine or face new sanctions.
Meanwhile, oil prices ended the week in the green, with crude closing above $66 per barrel as traders await the next decision from OPEC+.
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