US Stocks Plunge in 2025 as Weak July Jobs Data and Trump’s New Tariffs Rattle Markets

• What Triggered the Market Meltdown?
• Banking Stocks Take a Beating
• Europe's Mixed Signals
• Fed Rate Cut Odds Surge
• Trump's Tariff Wildcard
• What Comes Next for Investors?
• FAQ

Wall Street faced a brutal selloff on Friday as disappointing employment figures and fresh trade tariffs from the TRUMP administration sent shockwaves through global markets. The Dow Jones plummeted 640 points (1.4%), while the S&P 500 and Nasdaq Composite dropped 1.6% and 2.1% respectively. Banking and industrial stocks bore the brunt of the selloff, with JPMorgan Chase sinking nearly 4% and Caterpillar falling 3%. The dollar index suffered its worst day since April as traders fled to safer assets, with the yen surging 2.2%. Meanwhile, Fed rate cut expectations skyrocketed to 75.5% probability after the jobs report revealed only 73,000 new positions created in July – far below economist forecasts.

What Triggered the Market Meltdown?

The July jobs report delivered a one-two punch to investor confidence. With just 73,000 positions added (versus 100,000 expected) and prior months' figures revised downward, the data confirmed growing weakness in the labor market. "We're seeing clear cracks in the employment picture," noted a BTCC market analyst. "Job cuts have skyrocketed 140% year-over-year, with government layoffs leading the charge at 292,294 positions eliminated." The tech and retail sectors followed with 89,251 and 80,487 job losses respectively, pushing 2025's total layoffs past 806,000 – the highest January-July tally since the pandemic year of 2020.

Banking Stocks Take a Beating

Financial institutions got hammered as credit growth concerns mounted. JPMorgan Chase (JPM) led the declines with a 3.9% drop, while Bank of America (BAC) and Wells Fargo (WFC) each lost over 3%. "The numbers suggest loan demand could dry up faster than expected," observed a trader on the NYSE floor. Industrial giants didn't escape unscathed either – GE Aerospace (GE) and Caterpillar (CAT) both slid about 3% on anticipated demand weakness.

Europe's Mixed Signals

While Eurozone inflation held steady at 2% (slightly above the 1.9% forecast), Trump's new tariffs sparked a 1.8% plunge in the Stoxx 600 – its worst session since April. Travel stocks tumbled 2.7% and European banks 2.9% as trade uncertainty spread. The dollar's 1% drop (per Bloomberg Dollar Spot Index) marked its steepest decline since April 21, with the yen and euro gaining 2.2% and 1% respectively.

Fed Rate Cut Odds Surge

CME Group's FedWatch Tool showed a dramatic shift in expectations, with September rate cut probability jumping from 40% to 75.5% post-report. "The labor market's clearly softening," Cleveland Fed President noted to Bloomberg. Treasury yields reflected the sentiment, with the 10-year note falling to 4.25% – its lowest in nearly a month. Even Fed hawks like Waller and Bowman reportedly reconsidered their stance after the data release.

Trump's Tariff Wildcard

The WHITE House's new trade measures against multiple countries exacerbated global selloffs. While Powell emphasized monitoring tariff impacts, markets clearly priced in higher recession risks. "Between weak job growth and these protectionist policies, you've got a recipe for volatility," commented CNBC's Jim Cramer, who criticized the Fed's wait-and-see approach.

What Comes Next for Investors?

With corporate earnings season approaching and Fed policymakers divided, analysts recommend caution. "This jobs report changes the calculus," said our BTCC strategist. "Markets will now scrutinize every economic indicator for confirmation of this slowdown." Meanwhile, currency traders continue favoring the yen and euro as dollar weakness persists.

FAQ

How much did US stocks drop on August 2, 2025?

The Dow Jones fell 640 points (1.4%), S&P 500 lost 1.6%, and Nasdaq Composite declined 2.1%.

What was the main cause of the market decline?

Disappointing July jobs data (only 73,000 new jobs vs 100,000 expected) combined with new Trump administration tariffs triggered the selloff.

Which sectors were hit hardest?

Banking stocks (JPMorgan -3.9%, Bank of America -3%) and industrials (Caterpillar -3%) suffered significant losses.

How did the Fed react to the jobs report?

Markets now price in a 75.5% chance of a September rate cut, up from 40% before the report.