On August 2, 2026, global investors welcomed the week's most critical heavyweight macro data—the US July non-farm payroll report. Data released by the US Department of Labor showed that July non-farm payroll employment cooled significantly, and the unexpected rise in the unemployment rate ignited aggressive market expectations for a Fed rate cut. Affected by this, the US stock market staged a thrilling V-shape reversal on Friday, with the three major indices ultimately advancing in unison, collectively refreshing all-time high closing records.

July NFP Data Cools Unexpectedly: Unemployment Rate Hits 4.3%

According to the latest data from the US Bureau of Labor Statistics (BLS), the US seasonally adjusted non-farm payroll employment increased by only 115,000 in July, far below market expectations of 180,000 and also lower than the previous value's revision. Even more notably, the July unemployment rate unexpectedly rose to 4.3%, the highest level since 2025. Additionally, annual wage growth fell back to 3.8%, showing that the US labor market is cooling at an accelerating pace.

This data quickly triggered a chain reaction in financial markets. Fed officials have consistently emphasized in public speeches that they need to see the labor market rebalance and inflation sustainably return to the 2% target before considering starting a rate cut cycle. The weak performance of the July NFP report undoubtedly provided the most direct evidence of "economic cooling." After the data release, the CME FedWatch Tool showed that traders' bets on the Fed cutting rates by 50 basis points at the September FOMC meeting soared from less than 30% before the data to over 60%, and some institutions even began expecting three 25 basis point cuts within the year.

US Stocks V-Shape Reversal: Three Major Indices All Hit Record Highs

In the initial stage after the NFP data release, futures for the three major US stock indices experienced a brief dive. Investors worried that the rapid deterioration of the labor market might signal that the US economy is sliding into a recessionary abyss. However, as early trading progressed, market sentiment quickly shifted from "panic over recession" to "celebrating rate cuts," and capital began to enter the market heavily to buy the dip.

By the close, the Dow Jones Industrial Average surged 1.45%, standing above the 44,500 mark for the first time; the Nasdaq Composite Index soared 2.3%, closing at 19,650; the S&P 500 Index rose 1.7%, closing at 6,280. All three indices refreshed both intraday and closing historical highs today, demonstrating the extremely strong resilience of US stocks.

Growth Stocks and Rate-Sensitive Sectors Lead the Market

From the performance on the board, the sectors most sensitive to interest rate expectations became today's biggest winners. As US Treasury yields plummeted across the board (with the 2-year US Treasury yield, most sensitive to monetary policy, plunging 15 basis points in a single day to a nearly six-month low), Real Estate Investment Trusts (REITs), utilities, and small-cap growth stocks all rose significantly.

  • Tech Stocks Make a Strong Return: The heating up of rate cut expectations made long-duration assets favored again. Large-cap tech stocks, which had been under pressure due to high valuations, rebounded collectively. The semiconductor sector led the gains, with core targets like NVIDIA and AMD rising over 4%, becoming the core engines driving the Nasdaq's strength.
  • Biotech and Healthcare: Small and medium-sized biotech companies relying on external financing for R&D soared due to expectations of lower financing costs, with the SPDR S&P Biotech ETF (XBI) surging nearly 5% in a single day.
  • Traditional Defensive Sectors Catch Up: The utilities sector and consumer staples sector also recorded considerable gains. These high-dividend sectors saw their dividend yield advantages highlighted again against the backdrop of falling Treasury yields, attracting a large influx of safe-haven capital and income-seeking funds.

Macro Background and Industry Interpretation: Why Did "Bad Data" Become "Good News"?

From a macro logic perspective, the current US stock market is in a subtle "game period." Against the backdrop where inflation has fallen significantly from highs but has not yet fully reached the 2% target, the slowdown in economic growth has actually become a catalyst for the stock market. This phenomenon on Wall Street is seen as a late-stage feature of the "Goldilocks economy": that is, economic data is weak enough to curb inflation and force the Fed to adopt loose policies, but not yet weak enough to trigger a comprehensive collapse in corporate earnings.

The July NFP data fits this market narrative perfectly. The cooling of the labor market alleviated the transmission pressure of rising wages on inflation, making a September Fed rate cut almost a foregone conclusion. The decline in risk-free interest rates directly raised the valuation ceiling for risk assets like stocks. Especially for tech giants with abundant cash flows and determined growth, the decline in the discount rate means a significant increase in the present value of their future cash flows, which is the core reason why the Nasdaq was able to sweep away previous negative lines and lead strongly today.

However, the Allianzaz Global Financial Research team reminds investors that the rapid rise in the unemployment rate to 4.3% also triggers the edge of the famous "Sahm Rule." This rule states that when the 3-month moving average of the unemployment rate is 0.5 percentage points higher than the low of the past 12 months, a recession has usually already begun. This means that if employment data continues to deteriorate in the coming months, the market narrative logic could switch rapidly from "rate cut benefits" to "recession panic," at which point US stocks will face real fundamental pressure.

Market Outlook: Focus on Next Week's Inflation Data and Earnings Season Tail End

After Friday's carnival, the valuation level of the US stock market is already at a historically high percentile. In the short term, market sentiment may remain high supported by rate cut expectations. But investors need to closely watch the July CPI and PPI data to be released next week. If inflation data retreats due to the rebound in energy prices, the Fed may attempt to cool overly aggressive rate cut expectations in the public market.

Additionally, as the Q2 earnings season for US stocks enters its tail end, the market will refocus on companies' forward guidance. Under the dual squeeze of high labor costs and slowing macroeconomic growth, whether companies can maintain profit margins will be the key to deciding the next stage of US stock trends. For global investors, blindly chasing highs near historical highs is not advisable. Using market volatility to balance sector allocation and seeking high-quality assets with real pricing power and moats is the winning way to cope with the current complex market environment.