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Investing.com -- U.S. stocks fell sharply on Friday as markets opened August with renewed concerns about economic weakness and the impact of newly adjusted tariffs announced by President Donald Trump.
The Dow Jones Industrial Average dropped 542.40 points, or 1.23%, to close at 43,588.58—its steepest daily loss since mid-June. The S&P 500 declined 1.60% to 6,238.01, marking its worst day since late May.
The Nasdaq Composite slid 2.24% to finish at 20,650.13, its largest single-day drop since April.
Friday’s sell-off followed a disappointing U.S. jobs report for July. Nonfarm payrolls rose by just 73,000, falling well short of economists’ expectations for a 100,000 increase.
Previous months saw sharp downward revisions, with June payrolls revised to 14,000 from 147,000 and May lowered to 19,000 from 125,000. The revisions reinforced concerns that the labor market has been softening for some time.
All three major indexes posted weekly losses. The S&P 500 fell 2.4%, its worst week since late May. The Dow dropped 2.9%, marking its largest weekly decline since early April, while the Nasdaq retreated 2.2%.
Looking ahead to this week, it will be a relatively quiet one in terms of economic updates, with just a few events on the calendar.
Monday brings no notable data releases, and the main focus will be Tuesday’s U.S. ISM Services PMI report, followed by a light schedule midweek.
Investors will also be monitoring comments from several Federal Reserve officials throughout the week for any signals on future policy direction.
Another packed week of earnings ahead
According to Goldman Sachs, roughly two-thirds of S&P 500 companies have now reported second-quarter results, with 63% beating consensus EPS forecasts—one of the highest rates of upside surprises in the past 25 years.
Earnings growth for the quarter is tracking at 9% year-over-year, well ahead of the 4% expected at the start of the season.
However, the strength in beats may be misleading. Goldman strategists said “the frequency of positive ‘surprises’ largely reflects the unrealistically low bar created by estimates coming into the quarter,” which has also meant stocks have seen “smaller-than-average reward” for beating expectations.
This week, on tap will be earnings reports from Disney (NYSE:DIS), McDonald’s (NYSE:MCD), and Caterpillar Inc (NYSE:CAT)—members of the Dow Jones Industrial Average—that could offer further insight into the broader economy.
A strong showing may help lift the Dow to a new record, with the index currently hovering just below its December peak.
Other high-profile names due to report in the coming days include, Palantir Technologies (NASDAQ:PLTR), Pfizer (NYSE:PFE), AMD (NASDAQ:AMD), Snap Inc (NYSE:SNAP), Super Micro Computer Inc (NASDAQ:SMCI), and Uber (NYSE:UBER), among others.
What analysts are saying about U.S. stocks
Evercore ISI: "When the “news” hit this past week on tariffs, deals, and AI (MSFT, META (NASDAQ:META) huge earnings gaps higher), stocks suddenly had nowhere left to run. Our base case remains a -7% to -15% pullback into the challenging Sept/Oct timeframe. What to do? Stay invested strategically in a core thematic portfolio of AI Enablers, Adopters and Adapters in AI-centric O/P sectors Comm. Svcs., Cons. Disc., Info. Tech.; the Bull Market has further to run."
Morgan Stanley (NYSE:MS): "We think tariff-related inflation will be temporary, and tariffs could even be disinflationary/demand destructive in certain industries—i.e., in consumer where pricing power is elusive. As a result, we think the Fed will eventually transition to cuts. However, a delay of those cuts in the face of weaker growth data could lead to a correction in equity markets. As discussed previously, we’re buyers of dips, and Friday may be all we get to the downside for now."
"While there’s risk in the near-term, we are gaining confidence in our 12-month bullish view fueled by better earnings/cash flow growth.
RBC Capital Markets: "With the rally finally taking a tiny hit, and many financial market participants (ourselves included) getting ready for summer vacations, we are dusting off our four tiers of fear slide which outlines how we think about drawdowns in the US equity market from an S&P 500 perspective. If a tier 1 garden-variety pullback (5-10% drawdown) has started, it could take the S&P 500 into the 5,751-6,075 range.