Markets posted their worst single-day decline since April, with the S&P 500 falling 2.71% after China announced sweeping export restrictions on rare earth minerals. Meanwhile, unprecedented federal workforce reductions may be underway during the government shutdown, creating uncertainty just as the Fed prepares for its October meeting with limited economic data.
The S&P 500 finished the week up 1.23% as investors discounted the need for a fully functioning government and looked through weakening economic data in anticipation of the Fed's perfect timing in cushioning any economic weakness. Nothing says "rational market" quite like hitting fresh records while 750,000 federal workers sit at home unpaid and the Bureau of Labor Statistics goes dark. Friday's jobs report? Delayed indefinitely. September's benchmark revision? A record 911,000 fewer jobs than initially reported. Wednesday's ADP report? Private payrolls fell 32,000—the biggest drop since March 2023. The market's response? Another leg higher, because apparently deteriorating labor data is bullish when it keeps the Fed cutting rates. And missing data is even better—we can just imagine whatever we want.
This week's economic data revealed massive job revisions, declining wholesale prices, and accelerating inflation. As markets bet on a September 17 rate cut, the contradictory signals raise a critical question: can monetary policy fix what trade uncertainty broke?"
Friday's employment report delivered a shock: just 22,000 jobs added in August, far below the 75,000 economists expected. The unemployment rate ticked up to 4.3%, the highest since October 2021, while job openings fell to a 10-month low.
This week's economic data revealed an economy pulling in different directions. Durable goods orders fell 2.8%, but excluding volatile transportation equipment, orders actually rose 1.1%. Consumer sentiment dropped sharply, yet spending remained robust. Housing prices cooled but didn't crash. The consistent theme across all indicators: gradual cooling rather than dramatic collapse.
Fed Chair Jerome Powell delivered his highly anticipated speech at Jackson Hole this Friday, and the result was a masterclass in strategic ambiguity. While Powell acknowledged that job growth has slowed and inflation remains above the Fed's target, he carefully avoided making any concrete promises about September rate cuts. Yet markets heard exactly what they wanted to hear. Traders are now betting heavily on a quarter-point rate cut next month, essentially reading between the lines of Powell's diplomatic Fed-speak. This disconnect between what was actually said and what markets interpreted reveals something important about how financial markets operate—and what it means for your portfolio and financial planning decisions. The real question isn't what Powell said, but whether he'll deliver on what markets think they heard.