U.S. stock futures are indicating gains for Monday’s open, as markets aim to recover from steep declines experienced over the past two trading days.
Following a significant pullback that pushed the Nasdaq and S&P 500 far below their recent all-time highs, bargain hunters seem ready to jump back in, snapping up shares at reduced prices.
Friday’s sell-off was driven by growing concerns over President Donald Trump’s new tariffs, disappointing job growth data, and a sharp decline in Amazon’s (NASDAQ:AMZN) shares.
There is also some cautious optimism that the weak employment report may encourage the Federal Reserve to cut interest rates at its upcoming September meeting.
Data from CME Group’s FedWatch Tool shows the probability of a 25-basis-point rate reduction has surged to 85.4%, up from 63.1% just one week prior.
After falling moderately on Thursday, stocks tumbled more sharply on Friday. The major indexes all gave up substantial ground, with the Nasdaq and S&P 500 retreating well off the intraday record levels hit earlier in the week.
Although markets bounced off session lows by the close, the day ended with losses. The Nasdaq dropped 472.32 points, or 2.2%, to finish at 47,231.61. The S&P 500 lost 101.38 points, or 1.6%, closing at 6,238.01, while the Dow fell 542.40 points, or 1.2%, to 43,588.58.
Over the course of the week, the Dow plunged 2.9%, with the S&P 500 and Nasdaq declining 2.4% and 2.2%, respectively.
The market retreat came amid growing worries about the economic impact of the new tariffs imposed by the White House, ranging from 10% to as high as 41% on imports from dozens of countries. A 40% tariff will also be applied to goods transshipped to avoid existing duties.
“Investors have been caught off guard, having previously hoped Trump would kick the new tariff levels down the road pending further negotiations with foreign trade partners,” said Russ Mould, investment director at AJ Bell. He added, “Instead, we’ve got new rates galore and that means investors need to spend time understanding what that means for companies in their portfolio.”
Market sentiment was further dampened by a Labor Department report showing July’s job gains missed expectations. Non-farm payrolls rose by just 73,000, below the forecast of 110,000, and downward revisions cut employment numbers for May and June by a total of 258,000.
With revisions, May’s job growth was revised to 19,000, and June’s to 14,000. The unemployment rate edged up to 4.2% in July from 4.1% in June, in line with projections.
Amazon shares tumbled 8.3% after the company delivered strong second-quarter results but disappointed investors with cautious operating income guidance for the current quarter.
Airlines suffered steep losses, with the NYSE Arca Airline Index tumbling 4.3%. Oil service stocks also faced pressure amid a sharp decline in crude prices, reflected by a 3.5% drop in the Philadelphia Oil Service Index.
Stocks in computer hardware, retail, and banking sectors declined noticeably, while pharmaceutical and housing stocks bucked the negative trend.
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