US Stocks Plunge Sharply on Weak July Jobs Data and Trump’s New Tariffs in 2025
- Why Did US Stocks Crash on August 2, 2025?
- How Bad Was the Jobs Report?
- Which Sectors Took the Biggest Hit?
- Did Europe’s Inflation Data Offer Any Relief?
- What’s Next for the Fed?
- Key Takeaways for Investors
- FAQs: Your Burning Questions Answered
Wall Street kicked off August with a massive sell-off as disappointing jobs data and fresh tariffs imposed by former President Donald TRUMP rattled investor confidence. The Dow Jones Industrial Average tumbled 640 points (1.4%), while the S&P 500 and Nasdaq Composite dropped 1.6% and 2.1%, respectively. Bank stocks were hit hardest, with JPMorgan Chase sinking nearly 4%. Meanwhile, the dollar slumped 1%, marking its worst day since April. Traders are now betting on a Fed rate cut, with odds jumping to 75.5%. Here’s a deep dive into what’s shaking the markets.
Why Did US Stocks Crash on August 2, 2025?
The US stock market faced its worst day in months after a double whammy of weak employment figures and aggressive trade policies. The July jobs report showed only 73,000 new jobs—far below the expected 100,000—while previous months’ data was revised downward. Adding fuel to the fire, Trump’s new tariffs triggered a global risk-off sentiment, sending European markets like the Stoxx 600 down 1.8%. Investors are now questioning whether the Fed will step in to stabilize the economy.
How Bad Was the Jobs Report?
July’s employment numbers were a gut punch to markets. Not only did job creation miss estimates, but layoffs surged 140% year-over-year to 62,075. Government cuts led the bloodbath (292,294 jobs lost), followed by tech (89,251) and retail (80,487). Year-to-date job losses now total 806,383—the highest since the pandemic year of 2020. As Jimmy Cramer bluntly put it on: "We’ve got weak job growth and stagnant wages. That’s when you cut rates."
Which Sectors Took the Biggest Hit?
- Banks: JPMorgan (-4%), Bank of America (-3.5%), Wells Fargo (-3.2%)
- Industrials: GE Aerospace (-3%), Caterpillar (-3%)
- Travel: European travel stocks fell 2.7%
The fear? A slowing economy will crush loan demand. Even the dollar got hammered, with the Bloomberg Dollar Spot Index dropping 1%—its steepest fall since April.
Did Europe’s Inflation Data Offer Any Relief?
Marginally. Eurostat reported July inflation at 2% (slightly above forecasts), but Core inflation held steady at 2.3%. Bond markets barely reacted, with German 10-year yields inching up just 1 basis point. The real drama came from Trump’s tariffs, which overshadowed any positive signals.
What’s Next for the Fed?
Before the jobs report, Fed Chair Jerome Powell downplayed September rate cuts. But the data forced a U-turn—CME’s FedWatch now shows a 75.5% chance of a cut, up from 40% the prior day. Cleveland Fed President Beth Hammack hinted at flexibility: "If labor weakens further, we may need to respond." Meanwhile, Treasury yields plunged, with the 10-year note hitting 4.25%, its lowest in a month.
Key Takeaways for Investors
1.—markets are pricing in Fed action by September.
2.—Trump’s tariffs could prolong market volatility.
3.—their plunge signals broader economic worries.
FAQs: Your Burning Questions Answered
How much did the Dow drop on August 2, 2025?
The Dow Jones Industrial Average fell 640 points (1.4%)—its steepest single-day decline in three months.
Why did Trump’s tariffs spook markets?
The new measures targeted multiple countries, reigniting fears of a global trade war and prompting a flight from risk assets.
Is the Fed likely to cut rates in September 2025?
Odds surged to 75.5% after the jobs report, per CME FedWatch. Even hawkish Fed officials like Waller and Bowman are now leaning dovish.
