US Stocks Record Highs Amidst Strong Earnings and Weaker Jobs Data

US stocks reached new highs on August 8-9 despite weaker-than-expected job growth, sparking rate cut hopes and optimism about the economy.

US equities closed the week at record levels after a July jobs report that came in far weaker than forecast. The S&P 500 gained 0.62% to finish at 7,757.64, a record close, while the Nasdaq Composite rose 1.3% to 26,690.62,.

The catalyst was the payrolls print: US employers cut 23,000 jobs in July against a consensus for an 83,000 gain. The unemployment rate nonetheless fell to 4.1%, better than the 4.2% expected, as the labor force participation rate dropped to its lowest level in more than five years, which is the detail that complicates the clean bullish read.

The rate mechanism here is worth stating precisely, because it is not a rate-cut rally. A day before the report, fed funds futures priced a 55% chance of a quarter-point rate increase; after it, most traders expected the Fed to hold at 3.50% to 3.75%,. Equities rallied because a hike came off the table, not because cuts came onto it. That framing sets up the week ahead, where CPI is the next test: a hot inflation print would put the hike back into the distribution without the labor market having improved.