The US labor market unexpectedly contracted in July, with nonfarm payrolls declining by 23,000 jobs, according to the Bureau of Labor Statistics. This marks the first monthly drop in years and follows a downwardly revised loss of 20,000 in June. Economists had forecast a gain of about 83,000 jobs, making the report a clear downside surprise.
Adding to the weak picture, payroll gains for May and June were revised lower by a combined 103,000 jobs. The unemployment rate ticked down to 4.1% from 4.2%, but that was largely due to a drop in labor force participation to 61.4%, the lowest in over five years. Average hourly earnings rose just 3.2% year-over-year, below expectations.
Following the data, traders scaled back bets on a September Federal Reserve rate hike. According to CME Group's FedWatch tool, the probability of a September increase fell to 44%. US stock futures advanced and Treasury yields declined as investors anticipated a less aggressive monetary policy path.
Gold rallies to seven-week high
Gold prices climbed sharply after the weak jobs report, as lower rate expectations boosted demand for the precious metal. Spot gold rose 2.3% to $4,340.19 per ounce after earlier gaining more than 3%, reaching its highest level since June 17. US gold futures settled up 2.53% at $4,408.
The metal is on track for its strongest weekly performance since January, advancing more than 7% this week. UBS reiterated its bullish outlook, forecasting gold could reach $5,000 per ounce during the first half of 2027. The weaker dollar and falling yields also supported bullion.
Oil volatile amid Hormuz negotiations
Oil prices remained volatile as markets assessed negotiations between Iran and Oman over shipping through the Strait of Hormuz. Brent crude fell to $81.93 per barrel, while West Texas Intermediate climbed to $76.91. Both benchmarks rebounded on Friday but were still heading for weekly losses exceeding 9%.
Reports indicated Iran is seeking transit fees of 5% to 7% of cargo value, while Oman has discussed lower fees and the United States opposes such charges. Investors also monitored regional security risks after Saudi Arabia warned of possible coordinated attacks on civilian and energy infrastructure, and Yemen's Houthi forces claimed missile and drone strikes on Saudi deployments.
Senate passes Russia sanctions bill
The US Senate overwhelmingly approved legislation to expand sanctions on Russia while granting President Donald Trump broader authority to impose tariffs on countries purchasing Russian energy. The measure passed by an 86-11 vote and now heads to the House of Representatives.
The bill would authorize tariffs of up to 100% on the largest buyers of Russian crude oil and natural gas, as well as countries accused of helping Russia evade energy sanctions. It also allows tariffs of up to 500% on Russian goods imported into the US and extends the Iran Sanctions Act through 2031.
Lawmakers from both parties described the measure as a stronger tool to pressure Moscow, but critics noted its effectiveness will depend on whether the White House chooses to use the expanded authorities, as the bill includes broad presidential waiver powers.
For more on market-moving developments, see our market digest on Alphabet's bond sale and oil surge, and Dow's record close amid Nvidia's surge.
This article is for informational purposes only and does not constitute financial advice.
