President Trump’s sweeping tariffs take effect
New U.S. tariffs are ready to take effect, targeting trade deficits with rates up to 41% and key country exemptions.
U.S. stock futures are higher as investors search for signs that will help them determine if the economy is weakening after a shockingly weak jobs report on Aug. 1.
Businesses added a less-than-expected 73,000 new jobs in July, the Bureau of Labor Statistics said. Even worse, job gains for May and June were revised down by a whopping 258,000, portraying a much weaker labor market than believed in late spring and early summer and setting off alarms that the Federal Reserve may have been wrong about leaving interest rates unchanged last week.
Federal Reserve Governors Chris Waller and Michelle Bowman who voted to lower rates last week “commented that they felt the Fed was being ‘overly cautious’ with the risk that policy is ‘falling behind the curve,'” said James Knightley, chief international economist at Dutch bank ING. “This sentiment is likely going to be felt more broadly within the Fed after (the jobs) numbers, especially with tariffs set to eat into household spending power and corporate profits, thus creating a major headwind for growth.”
At 6 a.m. ET, futures tied to the blue-chip Dow rose 0.64%, while broad S&P 500 futures added 0.64% and tech-heavy Nasdaq futures gained 0.76%.
Will the Fed lower rates soon?
The CME FedWatch tool, which measures the odds the Fed will change rates at upcoming policy meetings, now shows more than an 89% chance for a rate cut at the Fed’s September meeting.
However, Comerica Bank Chief Economist Bill Adams said chances for a September rate cut are high but not a sure bet.
“The decision isn’t a slam dunk, since labor supply also fell in July,” he said. “In fact, the labor force level has fallen for three straight months…The Fed will see the August jobs report before their September rate decision. If it shows labor supply declined again and held the unemployment rate steady while tariffs push up inflation, the Fed is likely to hold interest rates steady again.”
If the Fed does cut in September though, “this would heighten the chances of follow up 25-basis-point cuts in October and December despite a temporary rise in inflation on tariffs,” Knightley said.
Separately, President Donald Trump said he will name a new Federal Reserve governor and a new jobs data statistician in coming days. Last week, Fed Governor Adriana Kugler said she’s resigning from the central bank’s board on Aug 8, and Trump fired Erika McEntarfer, the U.S. commissioner of Labor Statistics, after the weak jobs report.
“Of the two personnel changes in economic policy Friday — McEntarfer’s dismissal, and Fed Governor Kugler’s resignation — we see the sacking of the BLS Commissioner as more significant,” said Michael Feroli, chief U.S. economist at JP Morgan. McEntarfer’s firing “presents risks to the conduct of monetary policy, to financial stability, and to the economic outlook.”
More earnings ahead
Earnings also continue to roll out, with Tyson, Wayfair and Freshpet among the companies slated to report before the opening bell.
With results in from 297 of the S&P 500 companies as of July 31, year-on-year earnings growth for the second quarter is now estimated at 9.8%, up from 5.8% estimated growth on July 1, according to data provider LSEG.
Later in the week, earnings from major companies like Disney, McDonald’s and Caterpillar could give investors a look at how the economy’s faring.
Oil sinks
Oil prices are under pressure after oil-producing countries and their allies, also known as OPEC+, agreed again to increase output at a time the global economy may be slowing, stoking fears of an oil glut ahead.
OPEC+ agreed to an additional 547,000 barrels-per-day of output starting in September.
Cryptocurrency
China reportedly denied it has enacted a new cryptocurrency ban. In 2021, China banned cryptocurrency trading and mining but nothing new has been issued since despite viral reports saying so.
Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and  subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.Â
