S&P 500 Plunges and Bonds Jump as July Jobs Data Sparks Fear of Recession

Also, 10-year T-note, gold, crude oil and Japanese yen futures

1. S&P 500 E-mini futures (/ES): -1.68% 
2. 10-year T-bond futures (/ZN): +0.89% 
3. Gold futures (/GC): +1.52% 
4. Crude oil futures (/CL): -2.04% 
5. Japanese yen futures (/6J): +1.79% 

The week of macro acronyms is coming to an end, and after GDP, FOMC and NFP, traders are feeling less optimistic about the US economy. The July US nonfarm payrolls report showed a meager 74,000 jobs added, below the soft forecast of 110,000. The unemployment rate (U3) rose to 4.2% from 4.1%, as anticipated. 

But the big news wasn’t in the topline figures for July: The revisions for May and June are nightmarish at best. The US economy added 258,000 fewer jobs than originally reported, provoking a dramatic repricing of rate expectations and asset prices across the board. Against the backdrop of the 2Q ’25 US gross domestic product (GDP) report — which showed core GDP slowing to 1.2% annualized — it’s evident a slowdown has arrived.  

Odds of a September interest rate cut hit 100%, whereas the /SR3Z5 contract’s gain implies an additional 25-basis-point (bps) rate cut has been tacked onto the end of this year (all eyes on Jerome “Too Late” Powell, chair of the Federal Reserve). For those keeping score at home, this would mean the next rate cut is for a “recession” reason, not a “maintenance” reason. Volatility has surged, with the spot VIX topping 20 for the first time since June 23. 

S&P 500 futures pierced through its 21-day exponential moving average (EMA) for the first time since June after the jobs report injected a sense of fear into equity markets. Apple (AAPL) retreated despite the company posting its largest growth in revenue in years. Amazon (AMZN) dropped over 6%, even though it beat estimates. Investors were concerned over Amazon’s warning about power and chip shortages that could hamper its efforts to compete in AI. The latest poll from the American Association of Individual Investors (AAII) showed 45.6% of respondents think stocks are overvalued. Continued selling in the S&P 500 would have investors looking to the 50-day simple moving average to support prices before reaching 6,100, where some resistance in June could possibly be seen as a new support level.  

Bond yields sank after the jobs report boosted bets for a rate cut in September. Those higher rate cut odds and the two dissents at this week’s Federal Open Market Committee (FOMC) meeting put a September cut at a very high probability. 10-year T-note futures (/ZNU5) rose 0.91% this morning, putting prices at the highest level traded since early July. Today’s move also marks the largest one-day percent gain since April, reflecting the quick repricing in the bond market to reflect the change in rate cut bets. Prices need to clear the early July swing high before moving higher.  

Gold prices (/GCZ5) rose over 1.5% after the jobs report this morning to put prices back at the 21-day EMA. Earlier this week, gold prices fell to the lowest level since late June, but the risk-off move in the equity market helped reverse the recent sentiment decline for the metal. With rate cuts looking increasingly likely moving forward, gold prices could have enough tailwinds to claw back more lost ground from the July highs.  

Crude oil futures (/CLU5) were little changed before the jobs report, but prices faded after the release as the prospect of lower economic activity dented the demand outlook for the commodity. Still, prices are on track to record a weekly gain following two weeks of losses. Oil traders were encouraged by a US threat to impose tariffs on Russian crude purchasers. OPEC+ will meet this week, and the group is expected to approve an additional output hike for September.  

Japanese yen futures (/6JU5) rebounded from a four-month low today after the US jobs data crossed the wires. Meanwhile, Japanese policymakers have expressed concern about the yen’s recent weakness, with Katsunobu Kato, Japan’s minister of finance, saying it is important for exchange rates to remain stable. The haven demand for the yen is unlikely to reverse soon given the importance of the US jobs report. Still, prices need to reclaim the 21-day EMA for traders to be confident that the recent downtrend can be extinguished.  

Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater

Christopher Vecchio, CFA, tastylive’s head of futures and forex, has been trading for nearly 20 years. He has consulted with multinational firms on FX hedging and lectured at Duke Law School on FX derivatives. Vecchio searches for high-convexity opportunities at the crossroads of macroeconomics and global politics. He hosts Futures Power Hour Monday-Friday and Let Me Explain on Tuesdays, and co-hosts Overtime, Monday-Thursday. @cvecchiofx

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