S&P 500 Suffers Biggest One-Day Drop Since May

The S&P 500 posted its largest one-day fall since May on Friday, dropping 1.6% following weak US jobs data and renewed tariff concerns. The FTSE followed suit with its biggest daily drop for 4 months. The dollar also saw its steepest daily decline against the yen since January 2023, as markets ramped up expectations for Federal Reserve rate cuts. Political risk remains in focus after Donald Trump fired the head of the Bureau of Labor Statistics, raising doubts over the independence of US economic data.

Equities

The FTSE 100 fell 0.7% on Friday, marking its biggest one-day drop in almost four months and ending a six-week winning streak. The index was dragged lower by weakness in healthcare stocks and renewed tariff concerns following fresh levies announced by the US.

AstraZeneca dropped 1.9% and GSK lost 1.5% after President Trump sent letters to 17 global pharmaceutical companies demanding cuts to US drug prices. Watches of Switzerland fell 6.8% after the US imposed a 39% tariff on Swiss imports, affecting luxury watch brands such as Rolex, which the company retails. In contrast, education group Pearson gained 6.1% after forecasting stronger growth in the second half of the year.

In the mid-cap space, the FTSE 250 dropped 1.2%. Domestic concerns lingered after the UK Supreme Court overturned a landmark ruling on car finance commissions. The decision eased pressure on banks, with US-listed shares of Lloyds Banking Group rising 3.6%, though the stock closed down 2.6% in London.

In the US, equity markets fell sharply. The S&P 500 lost 1.6% on Friday for its biggest one-day drop since May, while the Nasdaq fell 2.24%, its steepest daily loss since April. For the week, the S&P 500 fell 2.36%, the Nasdaq 2.17%, and the Dow Jones 2.92%.

Amazon was the biggest drag on all three major indices. Shares in the online retail and cloud services giant slumped 8.3% after the company missed expectations for growth in its cloud division, Amazon Web Services. Apple closed 2.5% lower after CEO Tim Cook warned that US tariffs would add $1.1 billion in costs in the current quarter, despite issuing a revenue forecast above analyst estimates.

Markets briefly extended their losses after Donald Trump fired the US Bureau of Labor Statistics Commissioner, Erika McEntarfer, following a jobs report that showed a sharper-than-expected slowdown in US employment growth.

Forex & Commodities

The dollar fell sharply on Friday following weaker-than-expected US jobs data and a steep downward revision to the previous month’s figures.

Nonfarm payrolls increased by 73,000 in July, well below expectations of 110,000, while June’s total was revised down to just 14,000. The unemployment rate rose to 4.2%. The release prompted traders to ramp up expectations for rate cuts this year, with futures markets now pricing in two cuts before year-end, the first likely in September.

The dollar index dropped to 98.80. Against the yen, the greenback fell to 147.37, its largest daily loss since January 2023. The euro rose to $1.1571, on track for its biggest one-day gain since April. The Canadian dollar strengthened to C$1.3800 after initially slipping on news of new US tariffs.

The Bank of Japan signalled no urgency to resume rate hikes, adding to volatility in the yen. Meanwhile, Fed Chair Jerome Powell had struck a hawkish tone earlier in the week, but the latest data has shifted market focus back towards easing.

In commodities, gold rose nearly 2% on Friday, reaching $3,347.66 per ounce, its highest level in a week, as lower rate expectations and safe-haven demand lifted prices.

Brent crude was trading at $69.78 a barrel early Monday, up slightly after falling on Friday. OPEC+ confirmed plans to increase output by 547,000 barrels per day in September, but supply concerns remain due to US sanctions on Russian oil. For now, Indian refiners are expected to continue buying Russian crude despite pressure from Washington.