Nonfarm Payrolls Miss Expectations, Nasdaq Rallies: July Jobs Slip by 23K, Three Major Indices Rise Weekly

On the early morning of August 8, Beijing time, US stocks closed strongly on the last trading day of the week. Despite intraday volatility, the Nasdaq rose 0.8% at the close to 26,561.58 points; the S&P 500 increased by 0.32% to 7,734.35 points, and the Dow rose slightly by 0.06% to 53,917.52 points. All three indices are expected to post gains this week, with the Nasdaq potentially achieving its best weekly performance since May, driven by a rebound in chip stocks. The real catalyst for the market was an "unexpected cold snap" in the July nonfarm payrolls report—it not only reshaped the narrative of the job market but also significantly cooled market bets on a Fed rate hike in September. Nonfarm Cold Snap: Multiple Signals from a "Shrinking Quantity and Price" Job Market Data released by the Bureau of Labor Statistics on Friday showed that, seasonally adjusted, US nonfarm payrolls unexpectedly decreased by 23,000 in July, far below the 83,000 increase projected by the Dow Jones survey; the June data was revised down from a previous increase of 57,000 to an increase of 20,000, and the May final figure was also significantly revised down to 63,000. After revisions, the average net job creation over the past 12 months was only 34,000, with job expansion momentum nearly stalled. Unemployment rate: slightly decreased to 4.1%, below the market expectation of 4.2%; Labor force participation rate: further decreased to 61.4%, the lowest in over five years; Wages: the average hourly earnings increased by only 2 cents, with the year-over-year increase over 12 months falling to 3.2%, below the expected 3.5%. By industry, the main drag on job growth came from local government education (a decrease of 50,000) and retail (a decrease of 19,000), with finance also decreasing by 14,000. The healthcare industry, which was previously a main engine of job growth, only added 22,000, below its 12-month average of 36,000. The picture of a "shrinking quantity and price" job market reflects that the foundation for recovery remains fragile after the sluggishness of the labor market in 2025. Why Did "Bad News" Become "Good News"? A Dramatic Turn in Interest Rate Expectations The employment data itself was not stellar, but against the backdrop of persistent inflation and growing internal division at the Federal Reserve, weak employment actually eased concerns about a "forced rate hike." Last week, the Federal Open Market Committee voted 9 to 3 to keep the target range for the federal funds rate unchanged at 3.50% to 3.75%. Several officials recently stated that if price increases do not slow down, a rate hike might occur as early as September. The release of this nonfarm report clearly weakened the urgency of a September move. According to the FedWatch tool from the Chicago Mercantile Exchange, after the employment data was released, the probability of a Fed rate hike in September dropped from above 50% to about 44%, and the probability of a hike in October fell to 58.3%; another metric showed the probability of keeping rates unchanged in September rising to 59.9%. The cooling of interest rate expectations quickly transmitted to broad asset classes: the US Dollar Index plummeted, spot gold rose by 2.52%, and spot silver increased by over 4%; the bond market fluctuated, with the 10-year US Treasury yield briefly rising near 4.67%. For US stocks, the transmission chain of "weak employment—decreased probability of a rate hike—eased liquidity concerns" led the market to "celebrate bad news." Analysts point out that as long as inflation does not experience an uncontrolled rebound, the Fed is more likely to choose to wait rather than tighten, providing a breathing room for risk assets.

Weekly Review: From "Summer Storm" Lows to Two Consecutive Weeks of Gains

Reviewing this week, US stocks followed a volatile path of initial decline followed by a rally. The market opened with a significant surge on the first trading day of August: on Tuesday, August 4th, the S&P 500 index closed at a record high of 7736 points, the Dow Jones Industrial Average for the first time closed above 54,000, and the Nasdaq rose by 2.58% in a single day. The strong return of AI trading brought an estimated $3.5 trillion in market capitalization increase to the Nasdaq 100 index in just four trading days. On Wednesday and Thursday, the market briefly declined due to oil price rebounds and profit-taking, with the Dow falling over 460 points on Thursday, ending a five-day winning streak; however, it strengthened again on Friday, driven by non-farm payroll data and strong tech stocks.

On a weekly basis, the Nasdaq is poised to achieve its best weekly performance since May, thanks to the strong rebound in chip stocks. The iShares Semiconductor ETF (SOXX) rose by over 5% this week. The core logic supporting this rally remains earnings: as of this week, about 85% of S&P 500 components have released their Q2 earnings reports, with the proportion of earnings exceeding expectations reaching the highest level since 2021, and overall earnings growth potentially reaching the strongest level since 2021. Strong earnings have effectively alleviated market concerns about "overvaluation lacking support."

Stock and Sector Scan: A Tale of Two Extremes

On Friday's trading floor, most large technology stocks rose, with SpaceX surging over 7%, and Nvidia, Amazon, and Tesla all rising by over 1%, while Meta and Microsoft saw slight increases. Semiconductor and optical communication concepts rose across the board, with the Philadelphia Semiconductor Index rising over 1%, and optical electronics surging over 13%, with Lumentum rising over 5% and Corning rising over 3%. At the individual stock level, Airbnb surged by 15.3% after both revenue and profit exceeded expectations; cloud security company Cloudflare rose by over 7% due to stable full-year and quarterly outlooks.

Notably, the previously strong memory sector experienced a "mood swing" during the day, rapidly declining after the opening bell and turning red across the board: as of the report, Seagate Technology fell 5.59%, SK Hynix fell 3.16%, Western Digital fell 3.11%, and Flash fell 0.61%. The memory sector's upward correction contrasts sharply with the overall semiconductor rebound, indicating that market division regarding the AI hardware narrative has not been resolved—on one hand, the argument that "accelerated computing demand far exceeds supply" supports valuations, while on the other hand, concerns about oversupply and domestic substitution remain a hanging cloud.

In commodities, international oil prices fell, with Brent crude dropping over 1%, and WTI crude futures for September delivery falling 0.6% to $76.85 per barrel. The market has high hopes for negotiations between the US and Iran regarding the Strait of Hormuz transit agreement; if the agreement is reached, approximately one-fifth of global oil and gas trade routes are expected to resume, and oil prices, which had surged to $113 due to geopolitical conflicts, are expected to decline significantly, thereby pressuring inflation expectations.

Outlook: Momentum to Chase, Risks Coexist

Regarding the future market, some Wall Street institutions have adopted a more positive stance. Tom Lee, a research director at Fundstrat Global Advisors, stated on Friday, "There will be a wave of chasing ahead, and I believe this wave will push stock indices to 7900 and 8000 this month." Market participants generally believe that the decline in oil prices, the cooling of interest rate hike expectations, and earnings exceeding expectations constitute a short-term triple positive.

However, risks cannot be ignored: U.S. inflation remains stubbornly above 3%, and Q2 GDP showed only a mild expansion of 1.5%. If subsequent inflation data rises again, expectations for a September rate hike may reaccelerate. Furthermore, well-known short-seller Michael Burry still holds short positions in Nvidia, Micron, and Palantir, believing the stock market is near a major top. Next week, Nvidia will release its earnings report on August 26th. As the "lead flag bearer" of the AI narrative, its guidance will directly determine market direction. August is historically a month of high volatility for U.S. stocks, so while chasing gains, investors must keep their seatbelts fastened.

Implications for Asian Investors

For Asian investors, this week's market movements offer several insights: First, the sharp drop in the Dollar Index and the strengthening of precious metals highlight the value of a "USD-Gold" hedge in asset allocation. Second, the intraday reversal in the memory sector indicates a clear divergence within the AI hardware space, cautioning against chasing a single trend. Third, the Federal Reserve's policy path is highly data-dependent; every release of key indicators such as Nonfarm Payrolls and CPI can trigger sharp short-term fluctuations in the Nasdaq. Sound position management and risk control are more important than predicting the direction.

Overall, U.S. stocks remain strong under the narrative of "earnings supporting valuation," and the Nasdaq is expected to post its best performance since May on a weekly basis. However, weak employment data also reminds us that the U.S. economy is not without hidden concerns. For Asian investors, the best approach is to seize structural opportunities amidst volatility and dynamically adjust strategies anchored by data to navigate the August market.