Stock markets in the United States experiencing a downturn: job market weakness, Amazon's collapse, and Federal Reserve uncertainty negatively impacting the Dow Jones Industrial Average and Nasdaq Composite
U.S. Jobs Market Shows Sluggish Growth in July, Causing Market Volatility
The U.S. jobs market experienced a setback in July 2021, with the economy adding only 73,000 jobs, significantly lower than the expected average of 104,000 new jobs. This disappointing jobs report has caused ripples in the stock market, as investors view the slower job growth and rising unemployment as potential indicators of an economic slowdown.
This weak performance in the jobs market has highlighted growing economic uncertainty and signs of a weakening labor market amid concerns such as ongoing trade tensions and other macroeconomic challenges. Economist Thomas Gitzel of VP Bank stated that trade disputes are leaving clear brake marks on the U.S. jobs market.
The unemployment rate in July also rose to 4.2%, adding to the concerns about the health of the U.S. economy. This disappointing jobs report has led to negative reactions in the stock market, with the Dow Jones Industrial Average ending down 1.23 percent at 43,588.58 points, hitting its lowest level since late June. The S&P-500 index also fell 1.60 percent to 6,238.01 points, and the Nasdaq 100 lost 1.96 percent to 22,763.31.
The job growth in the previous two months was revised downwards by a total of 258,000, further adding to the concerns about the health of the U.S. economy. One of the companies that were affected by this weak jobs report was Moderna, whose shares fell by 6.6 percent due to a slight revision of its revenue forecast for the current fiscal year.
Another company that saw a drop in its share price was Amazon, with shares falling by 8.3 percent due to the disappointing quarterly results. Criticism was directed towards the weak performance of Amazon's cloud computing platform AWS.
However, not all tech companies saw a decline in their share prices. Microsoft and Meta (formerly Facebook) impressed with their numbers the day before, with their shares performing well.
In contrast, Apple received praise from analysts for its business figures, but shares fell by 2.5 percent due to the gloomy mood among investors. JPMorgan praised Apple for its significantly accelerated revenue growth for both the iPhone and the Mac.
The job market struggles were not limited to the U.S. as Coinbase shares plummeted by 16.7 percent due to unexpectedly low revenue for the second quarter.
One positive note in the stock market was the performance of Reddit, as the social networking company reported its most profitable quarter to date and also projected unexpectedly high revenue for the third quarter. Reddit shares soared by 17.5 percent as a result.
The Dow Jones Industrial Average has been losing ground since Monday and finished the week with a loss of nearly three percent, its worst performance since early April. The early resignation of Fed Governor Lael Brainard, effective August 8, is causing market jitters. Economist Thomas Gitzel of VP Bank also stated that tariffs are dampening economic growth more than previously thought, and inflation could increase due to import tariffs.
In conclusion, the decline in July 2021 U.S. employment reflected weaker-than-expected job additions and a higher unemployment rate, which in turn led to negative reactions in the stock market due to fears of slowing economic momentum. The weaker jobs report generally raises concerns about reduced consumer spending and slower overall economic growth, contributing to increased volatility and downward pressure on stock prices.
What could this weak jobs market in the U.S. mean for finance and investing? Such a sluggish growth in July may impact the stock-market as investors might view it as a potential indicator of an economic slowdown, possibly leading to increased market volatility as they prepare for reduced consumer spending and slow overall growth.
