US stocks made a comeback on Monday, recovering from the previous week’s steep sell-off, triggered by weaker-than-expected labor data and concerns over rising tariffs. The S&P 500 climbed by 1.3%, the Dow Jones Industrial Average rose 1.1%, adding more than 400 points, and the Nasdaq Composite surged 1.7%. This bounce-back comes amid a broad market rally, although concerns about trade and inflation remain.
The market’s recovery today can be pointed to the optimism surrounding Big Tech earnings, a strong rebound in major stocks, and investor sentiment reacting to President Trump’s trade announcements. However, uncertainty over US labor market conditions and the ongoing tariff concerns remains key to the market’s direction for the rest of the week.
Market Movers:
- Tesla (TSLA) +3.1%: Tesla jumped after the board approved a $30 billion alternative compensation plan for Musk, as part of a court-mandated move following a legal dispute over Musk's original pay package. The new plan is designed to ensure that Musk remains focused on Tesla’s long-term growth and to mitigate the impact of any potential changes in the previously agreed-upon pay deal. Investors responded well, with the stock reflecting the renewed confidence in Musk's leadership, despite the ongoing court case.
- Wayfair (W) +10.9%: Wayfair surged following a strong earnings report, with the company reporting its highest revenue growth and profitability since 2021. The online furniture retailer posted earnings of $0.11 per share, significantly better than the $0.37 loss analysts had projected. Revenue for the quarter rose 5%, driven by growth in its US market.
- Amazon (AMZN) -2.5%: Amazon remains under pressure after concerns about its slowing growth in the cloud business (AWS). While Amazon's earnings met Wall Street’s expectations, investors were concerned by the lower-than-expected guidance for AWS, which raised questions about the company’s ability to keep pace with its cloud competitors, such as Microsoft’s Azure and Google Cloud.
- Joby Aviation (JOBY) +20.9%: Joby rocketed following an announcement that it had acquired Blade Air Mobility's helicopter rideshare business. The $125 million acquisition expands Joby’s footprint in the air mobility sector by providing it access to a network of key air terminals in major cities like New York. The move strengthens Joby’s position in the growing electric vertical take-off and landing (eVTOL) aircraft market, which investors view as a promising frontier in urban mobility. This acquisition signals significant growth potential for the company as it looks to lead the way in air taxi services.
- Palantir (PLTR) +2.0%: Palantir saw a solid uptick after securing a major $10 billion contract with the US Army, which combines more than 75 agreements into a single deal over the next decade. The contract is a significant win for Palantir, whose advanced data analytics software is increasingly in demand for government and defense applications. Analysts have also praised Palantir for its ability to successfully scale its AI-driven platform, driving optimism around its long-term revenue prospects. The company is set to report earnings later today, and investors are watching to see how this contract impacts its broader financial outlook.
Economic Data and Labor Market Concerns
The latest labor market data continues to drive market sentiment, especially after the disappointing July jobs report. The US economy added just 73,000 jobs, far below the expected 104,000, and the revisions to previous months’ numbers painted a bleaker picture of the economy. The unemployment rate ticked up to 4.2%, signaling potential cracks in the once-strong labor market. As a result, investors have reset their expectations regarding the Federal Reserve’s next moves. With the weaker-than-expected jobs growth, there is a higher likelihood of the Fed easing interest rates in the near future. Nearly 90% of traders are now betting on a rate cut by September, signaling that markets may not be anticipating an aggressive tightening cycle from the central bank.
These labor market dynamics come at a critical time, as ongoing trade and tariff concerns continue. A slowing labor market combined with geopolitical risks could lead to higher volatility in the coming months, especially as investors look for signals from the Fed on how it plans to address the slowing economic growth.
Trump’s Tariff Policy and Trade Uncertainty
President Trump’s aggressive trade policies continue to impact global markets, with new tariffs set to take effect this week. The President announced a substantial increase in tariffs on India, accusing the country of undermining sanctions on Russia by buying and reselling Russian oil. The escalation in tariffs also includes a 25% tariff on goods from India and additional duties on a range of other trading partners, including Canada and Mexico.
While Trump’s tariff decisions have sparked concerns about rising costs and inflation, UBS strategists have suggested that these tariff hikes are unlikely to cause a recession. The analysts believe that the tariff rate will eventually stabilize around 15%, which, though high compared to recent levels, is not expected to derail the current bull market. However, the uncertainty surrounding these tariffs has led to concerns about higher costs for businesses, which may ultimately affect corporate earnings in the second half of the year.
Looking Ahead
As the week continues, investors will remain focused on labor market data and any developments in the tariff front. Earnings season is far from over, with numerous S&P 500 companies set to report this week, including Palantir, Eli Lilly, and Disney. The focus will be on how corporate performance fares in light of macroeconomic uncertainties. Traders will also closely monitor the Federal Reserve’s stance on interest rates, with heightened expectations for a September rate cut following the weak jobs data. As markets digest these economic signals, the risk of further volatility remains elevated, especially if economic growth continues to slow. However, a solid earnings season from major tech stocks could help keep market sentiment buoyant, especially in sectors like cloud computing and AI.