Key facts
- U.S. payrolls unexpectedly fell by 23,000 in July.
- The unemployment rate also dropped, contrary to expectations.
- Markets are pricing in a 50-50 chance of a Federal Reserve rate hike in September.
- Brent crude oil prices rose above $84 per barrel.
- President Donald Trump has demanded Fed Governor Lisa Cook respond to mortgage allegations within three weeks.
- S&P 500 companies reported a 51% aggregate profit gain for the second quarter.
Markets are navigating a complex landscape following a surprise drop in U.S. payrolls for July, which did not significantly alter expectations for a Federal Reserve rate hike next month. Investors are pricing in a roughly 50-50 chance of a hike, with Treasury yields only marginally lower.
Several factors are contributing to market caution, including the unexpected decline in payrolls alongside a surprising drop in the unemployment rate. Additionally, oil prices remain elevated, with Brent crude trading above $84 per barrel amid tempered hopes for an Iran deal. The upcoming release of the July consumer price inflation report is also a key focus, with annual headline and core rates expected to tick lower but remain above 3%.
Fresh political pressure on the Federal Reserve has also surfaced, as President Donald Trump demanded Fed Governor Lisa Cook address mortgage allegations against her within three weeks, or face dismissal. This comes as stock markets continue to benefit from a strong second-quarter earnings season, with S&P 500 companies reporting an aggregate profit gain of 51%.
Asia stock markets generally rose in line with Wall Street's gains, while U.S. equity futures showed slight increases. China's July inflation data came in below forecasts. The market calendar for the day is otherwise light, with earnings season winding down, though updates from companies like Applied Materials and Cisco are anticipated.