Indexes end up 1%; investors ramp up rate-cut views after weaker payrolls

All three major U.S. stock indexes ended more than 1% higher on Monday as investors sought bargains after the previous session’s selloff and increased bets for a September rate cut in the wake of Friday’s weaker-than-expected jobs data.

Tesla shares rose after the electric vehicle maker granted CEO Elon Musk 96 million shares worth about $29 billion.

Odds for a September rate cut now stand at about 84%, according to CME Fedwatch. Market participants see at least two quarter-point cuts by the end of this year.

Friday’s bleak July jobs data also accompanied steep downward revisions for May and June.

“Today is just a little bit of dip-buying. It does show a pretty healthy sign of folks out there looking for an opportunity to get in,” said Mike Dickson, head of research and quantitative strategies at Horizon Investments in Charlotte, North Carolina.

“It’s a little concerning in the sense the labor market ... definitely appears to be weaker than people expected. A bit of an offset to that is the renewed rate cut expectations. There’s a high probability we’re getting a September cut.”

The S&P 500 and Nasdaq had hit a string of record highs recently.

According to preliminary data, the S&P 500 gained 92.06 points, or 1.48%, to end at 6,330.07 points, while the Nasdaq Composite gained 400.43 points, or 1.94%, to 21,050.56. The Dow Jones Industrial Average rose 588.78 points, or 1.35%, to 44,177.36.

Investors were still digesting U.S. President Donald Trump’s firing of Bureau of Labor Statistics Commissioner Erika McEntarfer on Friday, accusing her of faking the weak jobs numbers.

Also on Friday, Fed Governor Adriana Kugler unexpectedly resigned, which could open the door for U.S. President Donald Trump to reshuffle the central bank’s leadership in his favor.

Trump has been pushing the Fed to cut rates.

Among rising shares, Spotify gained as the music streaming platform announced plans to raise the monthly price of its premium individual subscription in select markets from September.

Joby Aviation jumped after the company said it will acquire helicopter ride-share company Blade Air Mobility’s passenger business for up to $125 million.

Whatever the market take was from Friday’s surprisingly soft U.S. payrolls update has been overshadowed by the instant firing of the statistician responsible for them - leaving more questions than answers about the veracity of these numbers and all those in the future.

The massive downward revisions to prior months’ job totals were a bigger initial jolt than the slight miss to July payrolls or the uptick in the unemployment rate. But President Donald Trump’s dismissal of Bureau of Labor Statistics boss Erika McEntarfer over what he called “rigged” data means investors now either dismiss the July report or assume future reports will be massaged to be more favorable to Trump.

* Trump’s firing of McEntarfer has prompted investors to revisit April’s questions about damage to U.S. transparency and institutional integrity - qualities that, for many, have been at the heart of America’s long-standing exceptional economic and financial performance. The early resignation of Federal Reserve Board Governor Adriana Kugler, also on Friday, now gives Trump the chance to put a third nominee on the seven-person Fed board - increasing his influence on the central bank while he is demanding steep interest rate cuts.

* The jobs data release on Friday has prompted market futures to price an 85% chance of a Fed cut next month - compared to less than 50% beforehand - and more than fully price two cuts by year’s end. U.S. Treasury yields plunged to their lowest in over a month. Ten-year yields clocked the biggest one-day fall of the year and the 2-30-year yield curve widened to its steepest in over three years. The dollar swooned, giving back a chunk of last month’s rally. Most of these moves were pared back slightly first thing on Monday.

* U.S. stocks ended down more than 1% on Friday, having already been jarred by the August 1 tariff announcements, and the VIX ‘fear index’ jumped above 20 for the first time since June - likely reflecting unexpected jobs market weakness and a duff earnings outlook from Amazon. Futures were back up more than 0.5% ahead of Monday’s bell as another heavy week of earnings beckons and Palantir tops Monday’s diary. With two-thirds of the S&P 500 having reported Q2 updates, the blended annual profit growth rate for the 500 firms is running at 11% - almost twice estimates one month ago and back roughly to where expectations were on January 1.

Market Minute:

* White House economic advisers on Sunday defended Trump’s firing of McEntarfer, pushing back against criticism that it could undermine confidence in official U.S. economic data.

* A top aide to Trump on Sunday accused India of effectively financing Russia’s war in Ukraine by purchasing oil from Moscow, after the U.S. leader escalated pressure on New Delhi to stop buying Russian oil.