A sharply disappointing US employment report for July reshaped interest rate expectations on Friday, triggering a broad rally in equities and a surge in gold prices. The S&P 500 closed at a record high, while the tech-heavy Nasdaq led gains as investors bet the Federal Reserve would hold off on further tightening.
Nonfarm payrolls fell by a seasonally adjusted 23,000 jobs last month, the Bureau of Labor Statistics reported, marking the first monthly decline in years and coming in far below the roughly 83,000 gain economists had forecast. Revisions erased a combined 103,000 jobs from the prior two months. The unemployment rate edged down to 4.1% from 4.2%, but only because labor force participation sank to 61.4%, its lowest in more than five years. Average hourly earnings rose just 3.2% year-over-year, also missing estimates.
The weak data caused traders to sharply reduce bets on a September rate hike. The CME FedWatch tool showed the probability of an increase falling to 44%, down from 55% a day earlier and 67% a week ago. US stock futures advanced and Treasury yields declined, with the S&P 500 closing up 0.6% at 7,756.44, the Nasdaq climbing 1.3% to 26,690.62, and the Dow adding 151 points. The iShares Semiconductor ETF (SOXX) gained roughly 7% for the week, helped by strong earnings from Atlassian, Cloudflare, and Airbnb.
Gold soared as lower rate expectations boosted the non-yielding asset. Spot gold jumped 2.3% to $4,340.19 per ounce, touching its highest since mid-June, while US gold futures settled at $4,408. UBS reiterated its forecast that gold could reach $5,000 per ounce in the first half of 2027.
Oil prices, meanwhile, remained volatile amid talks over the Strait of Hormuz transit framework. Brent crude fell to $81.93 and WTI to $76.91, both on track for weekly losses above 9%. Reports indicated Iran sought transit fees of 5-7% of cargo value, while Oman proposed lower rates and the US opposed charges. Separately, the US Senate overwhelmingly approved a bill expanding sanctions on Russia, granting the president authority to impose tariffs of up to 100% on major buyers of Russian energy and up to 500% on Russian goods imported into the US. The legislation also extends the Iran Sanctions Act through 2031.
