A trader works on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., July 30, 2025. REUTERS/Jeenah MoonJeenah Moon/Reuters
Stocks suffered heavy losses Friday and shorter-term U.S. Treasury yields plunged the most in two years after an unexpectedly weak jobs report shattered investors’ confidence in the strength of the American economy as historic tariffs were imposed against several trading partners.
U.S. nonfarm payrolls increased by 73,000 jobs last month, well short of the 110,000 jobs economists had expected. But it was revisions to June and May data that particularly caught the market off guard: 258,000 jobs that were thought to have been created over that two-month period were removed from the tally kept by the Labour Department’s Bureau of Labour Statistics.
Revisions to prior months’ jobs reports are often made, but rarely to such degree. The Labour Department gave no reason for the revisions. Economists have raised concerns about data quality in the wake of the Trump Administration’s mass firings of federal workers. In the wake of the data, U.S. President Donald Trump said he directed his team to fire the top Bureau of Labour Statistics official, contending without evidence that the jobs numbers have been manipulated for political purposes.
Trump fires head of U.S. employment data, claims weak jobs numbers were ‘manipulated’
The jobs report suggested a sharp deterioration in labour market conditions, which significantly raised expectations that the Federal Reserve will cut interest rates at its next policy meeting in September. Money markets are now putting odds of a quarter-point cut by the Federal Reserve at around 85 per cent, from just under 40 per cent a day earlier, according to data from CME FedWatch. Rate futures are now pricing in more than 50 basis points of easing over the course of this year.
“There’s no way to pretty-up this report. Previous months were revised significantly lower where the labour market has been on stall-speed,” said Brian Jacobsen, chief economist at Annex Wealth Management in Brookfield, Wisconsin. “Last year the Fed messed up by not cutting in July so they did a catch-up cut at their next meeting. They’ll likely have to do the same thing this year.”
Other data also cast doubt on the strength of the U.S. economy: The Institute for Supply Management showed U.S. manufacturing contracted for a fifth straight month in July and factory employment dropped to the lowest level in five years.
The S&P 500 recorded its biggest single-day percentage decline since May 21 while the Nasdaq suffered its biggest drop since April 21. Losses were less acute in Toronto, but the S&P/TSX Composite Index still fell the most since April 10.
The yield on the two-year U.S. Treasury, which closely tracks expectations for Fed actions, plunged to 3.71 per cent from 3.94 per cent just prior to the report’s release. Canadian government bond yields fell Friday as well, but much less than their U.S. counterparts.
Lowering interest rates is generally negative for the U.S. currency, and on Friday the dollar fell more than 2 per cent against the Japanese yen, the most since January 2023. The weakness in the greenback sent the loonie up by about half a cent and also propelled a 2-per-cent rise in gold, which becomes less expensive to buy internationally when the U.S. dollar weakens.
The Fed has held rates steady since December. A cut in rates would give the job market and overall economy a boost, but it could also risk fuelling inflation, which is hovering stubbornly above the central bank’s 2-per-cent target. The Fed tries to balance the risks in both the labour market and inflation.
With never-ending tariff drama, the Canadian economy limps along
On Friday afternoon, the Federal Reserve said Governor Adriana Kugler is resigning early from her term and will exit the central bank on Aug. 8, enabling Mr. Trump to select a new governor as he has ramps up pressure against Chair Jerome Powell to cut interest rates.
Stocks were already under pressure Friday morning ahead of the release of the jobs data, with investors concerned with the global trade and economic consequences of new tariffs announced by Mr. Trump Thursday night on dozens of countries. Some goods from Canada now face tariffs of 35 per cent.
The Dow Jones Industrial Average fell 542.40 points, or 1.23 per cent, to 43,588.58, the S&P 500 lost 101.38 points, or 1.60 per cent, to 6,238.01 and the Nasdaq Composite lost 472.32 points, or 2.24 per cent, to 20,650.13.
For the week, the S&P 500 fell 2.36 per cent, the Nasdaq declined 2.17 per cent, and the Dow fell 2.92 per cent.
Also weighing on U.S. equities was an 8.3-per-cent tumble in Amazon.com Inc. AMZN-Q shares after the company posted quarterly results but failed to meet lofty expectations for its Amazon Web Services cloud computing unit.
Apple AAPL-Q lost 2.5 per cent after it posted a current-quarter revenue forecast well above Wall Street estimates, but CEO Tim Cook warned U.S. tariffs would add US$1.1-billion in costs over the period.
The S&P/TSX Composite Index ended down 239.35 points, or 0.9 per cent, at 27,020.43, extending its pullback from a record closing high on Tuesday. For the week, the TSX was down 1.7 per cent.
Canadian data was also downbeat Friday. Canada’s manufacturing sector contracted for a sixth straight month in July as tariffs undercut trade with the U.S. and spurred firms to reduce inventory as well as staffing levels.
All ten major sectors on the TSX ended lower, led by a 2.4-per-cent decline for technology.
Energy lost 1.9 per cent as worries about a possible increase in OPEC oil production weighed on the price of oil. U.S. crude futures settled 2.8 per cent lower at US$67.33 a barrel.
Heavily weighted financials lost 0.9 per cent.
MDA Space Ltd. was a bright spot in Toronto. Its shares jumped 18.4 per cent after the aerospace company was selected as the prime contractor on a project for EchoStar.
With reports from The Associated Press and Reuters