Wall Street regains footing after last week’s sell-off

MANHATTAN (CN) — The tariff deadline passing, fallout from last week’s poor jobs report, the firing of the lead federal jobs statistician, and economic data hinting again at a coming recession could have taken their toll on investor sentiment.

Instead, Wall Street shrugged, with U.S. indices steadily rising throughout the week. By the closing bell Friday, the Dow Jones Industrial Average finished out the week up 589 points, with the S&P 500 and Nasdaq netting 151 points and 800 points, respectively.

Poor jobs data rattled investors last week, prompting President Donald Trump to fire the head of the Bureau of Labor Statistics. However, that monumental move — which risks politicizing further employment data — did not shake Wall Street when markets opened Monday.

“The decision by President Trump to fire the head of the Bureau of Labor Statistics has been made all the more striking for the lack of reaction it has provoked in financial markets,” Neil Shearing, group chief economist at Capital Economics, wrote in an investor’s note.

“But the erosion of institutions is insidious,” Shearing continued. “Recurring stress trends to weaken the resilience of the economic and financial system, allowing minor dysfunctions to accumulate into broader instability — a process that markets may be slow to detect, but quick to react to once the damage is done.”

This week, Trump attempted to justify the firing, showing off charts purporting to show the Biden administration had inflated its jobs numbers to the tune of 1.5 million. Stephen Moore — a remnant from the first Trump administration, conservative economist, and one-time pick to join the Federal Reserve — created the charts and claimed the computations were “some data that no one else does.”

Investors also should have had a negative reaction to the new tariff regime, but they did not. The Aug. 7 deadline imposed by the White House came, and with it came tariff rates of 10% or higher on more than 60 countries and the European Union.

Additionally, Wall Street wasn’t fazed by economic data released this week increasingly showing an economic contraction and weakening jobs market.

In its services survey, the Institute for Supply Management showed another decrease from 50.8 in June to 50.1 last month. The survey now hangs on the precipice, as any reading below the 50-point mark indicates a recession. The index has not read below that mark since May 2020, when the economy was in the throes of the Covid lockdowns.

ISM’s employment index did worse, landing in contraction territory for the second month in a row and fourth time out of the last five months. The institute said the most common topic among survey respondents surrounded tariffs.

The “prices paid” index also increased again to hit 69.9, the highest level seen since 2022, with some analysts saying the index is on route to hitting 4% by the end of 2025.

The group’s manufacturing survey has already shown weakness, and its latest survey showed contraction for the fifth consecutive month, hitting 48 for July after 49 recorded in June.

According to one cited comment by a survey respondent: “These tariff wars are beginning to wear us out. It’s been very difficult to forecast what we will pay in duties and calculate any cost savings we’ve had this year.”

“The messaging behind [Monday’s] stock market rebound was clear to me,” wrote Peter Boockvar, chief investment officer at the One Point BFG Wealth Partners. “As seen many, many times over the past few decades, the stock market cares more about Fed rate cuts than it does about the reasons for it.”

Follow @NickRummell