Key Insights
- U.S. stocks jumped after weak job data raised hopes for a Fed rate cut.
- The Dow soared nearly 600 points and completely wiped out Friday’s losses.
- Crypto investors are watching the markets, wondering if digital assets could follow suit.
The U.S. stock market kicked off the week with a powerful rebound. It was fueled by the rising speculation that the Federal Reserve may cut interest rates soon.
After a rough end to last week, investors are now optimistic. This is despite the disappointing jobs report that shows a possible change in monetary policy could be incoming.
The Dow Jones Industrial Average, in particular, jumped 585 points on Monday, recovering from Friday’s sharp losses. The S&P 500 and Nasdaq Composite also surged, gaining 1.47% and 1.95% respectively.
This bounce was the best single-day session since May and helped snap a four-day losing streak for the S&P.
Fed Rate Cut Rumors Trigger Market Optimism
The main driver of the initial stock market crash was the weaker-than-expected July jobs report. Only 73,000 jobs were added during the month, well below forecasts.
In addition, prior employment figures for May and June were revised downward. These combined issues deepened the worries about the labor market’s slowdown.
This data now has investors betting that the Fed will cut interest rates as early as September. Lower interest rates tend to boost stock prices by making borrowing cheaper for companies. It also reduces the appeal of bonds, which drives investors toward equities.
Jeffrey Gundlach, CEO of DoubleLine Capital, told CNBC that he still expects two rate cuts this year. He also believes the U.S. dollar will weaken further, which could benefit international assets.
Tariffs and Trump Shake Up Markets
The market turbulence last week wasn’t just about the jobs data. President Donald Trump also signed a new executive order that updated tariff rates on dozens of countries.
According to the administration, these “reciprocal” tariffs range from 10% to 41%. These are aimed at refining trade relationships to become fairer.
These moves have injected additional uncertainty into the financial markets. Investors are now watching for any developments in the US-China trade relations, especially after recent talks held in Stockholm.
Trump also fired the head of the Bureau of Labor Statistics (BLS) shortly after the July report was released. This further stoked political and market tensions.
Investors Look to Earnings, But August Could Be Rocky
Despite Monday’s relief rally, analysts are still on edge. August has a reputation for being a weak month for U.S. markets. Still, there is a great deal of optimism for upcoming earnings reports.
Companies like Palantir and AMD are expected to post results this week. Also, strong performance helps keep the markets afloat.
Wolfe Research warned that the market may enter a “bad news is bad news” phase. There, weak economic data hurts stocks despite rate cut hopes. Investors must see signs of financial strength to remain bullish, not just policy promises.
Can the Crypto Market Rebound Like Stocks?
The stock markets have bounced back so strongly. Some are asking: Could the crypto market see something similar? To answer this question, it is essential to understand some differences between the two markets.
For one, if the Fed cuts rates, that could support crypto assets. Lower interest rates often push investors toward riskier or alternative assets like Bitcoin and Ethereum.
Moreover, if investor confidence returns, it may trigger a wave of dip buying in the crypto market. It did the same with equities on Monday.
Optimism about the SEC’s incoming “project crypto” and clearer regulations for the crypto space could bring in more bullish momentum. In all, crypto may soon get its day in the sun. This could be seen if more positive news around DeFi, NFTs, or regulatory clarity surfaces.
However, there are still a few issues to iron out. The crypto space is still under heavy regulatory scrutiny despite moves from the SEC and CFTC to clarify these laws.
This means the market is extra-sensitive to the news at this juncture, and any negative headlines could derail sentiment.
