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Friday morning, the Bureau of Labor Statistics (BLS) released the July 2026 Employment Situation Report. Nonfarm payrolls plunged 23,000 versus Wall Street estimates of +80,000. The payroll miss was one of the largest on record and represented a 5-sigma miss. For context, a 5-sigma miss is the equivalent of 1 in 3.5 million. Said differently, at one job report per month, a miss that size would show up about once every 290,000 years.
The losses were mostly due to local government education (-50,000), retail trade (-19,000), and leisure and hospitality (-26,000 to 40,000). Macroeconomic headwinds such as higher energy prices, increased operating costs and squeezed transportation, retail, and hospitality companies. Meanwhile, although today's miss was notable, the downtrend is nothing new. Non-farm payrolls have trended downward for four consecutive months.
Why the Jobs Shock is Bullish for Equities
For Wall Street investors, they must separate the economy from the stock market. Prolonged jobs losses are bearish for stocks. However, with the unemployment rate still relatively low at 4.1%, the jobs miss is actually bullish for equities. That's because the main driver of equities is central-bank-driven liquidity.
"Earnings don't move the overall market; it's the Federal Reserve Board... focus on the central banks, and focus on the movement of liquidity... most people in the market are looking for earnings and conventional measures. It's liquidity that moves markets." ~ Stanley Druckenmiller
Before today's job numbers, it looked as if Fed Chair Kevin Warsh would need to hike interest rates to fight inflation. In fact, three members of the Federal Open Market Committee (FOMC) voted to raise interest rates at the Federal Reserve's latest monetary policy meeting. However, the latest data from betting markets suggest that a September rate hike is highly unlikely. According to the Polymarket betting market, September rate-hike odds plunged from nearly 60% in early August to ~35% today.
AI Stocks Stabilize
A key part of the market to watch is the AI industry. AI investment accounted for a whopping 50% of Q1 GDP growth. Tech stocks are coming off one of their most volatile months in years. However, leading AI stocks are showing signs of stabilization. For instance, Palantir jumped 30% after smashing Wall Street expectations. After post-IPO corrections SpaceX and Cerebras are trying to round out the right side of IPO base structures. Meanwhile, NVIDIA, the leading AI stock, finally showed some life, jumping more than 10% this week.
Bottom Line
Friday's job number was a rare 5-sigma miss. While the negative jobs number is bad news for the economy, it is positive for stocks because it means the Fed is less likely to raise interest rates.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.
Today you can access their live picks without cost or obligation.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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Zacks Investment Ideas feature highlights: Palantir, SpaceX, Cerebras and NVIDIA
For Immediate Release
Chicago, IL – August 10, 2026 – Today, Zacks Investment Ideas feature highlights Palantir (PLTR - Free Report) , SpaceX (SPCX - Free Report) , Cerebras (CBRS - Free Report) and NVIDIA (NVDA - Free Report) .
Why Bad Jobs News Is Good News for Equities
U.S. Jobs Number Disappoints
Friday morning, the Bureau of Labor Statistics (BLS) released the July 2026 Employment Situation Report. Nonfarm payrolls plunged 23,000 versus Wall Street estimates of +80,000. The payroll miss was one of the largest on record and represented a 5-sigma miss. For context, a 5-sigma miss is the equivalent of 1 in 3.5 million. Said differently, at one job report per month, a miss that size would show up about once every 290,000 years.
The losses were mostly due to local government education (-50,000), retail trade (-19,000), and leisure and hospitality (-26,000 to 40,000). Macroeconomic headwinds such as higher energy prices, increased operating costs and squeezed transportation, retail, and hospitality companies. Meanwhile, although today's miss was notable, the downtrend is nothing new. Non-farm payrolls have trended downward for four consecutive months.
Why the Jobs Shock is Bullish for Equities
For Wall Street investors, they must separate the economy from the stock market. Prolonged jobs losses are bearish for stocks. However, with the unemployment rate still relatively low at 4.1%, the jobs miss is actually bullish for equities. That's because the main driver of equities is central-bank-driven liquidity.
"Earnings don't move the overall market; it's the Federal Reserve Board... focus on the central banks, and focus on the movement of liquidity... most people in the market are looking for earnings and conventional measures. It's liquidity that moves markets." ~ Stanley Druckenmiller
Before today's job numbers, it looked as if Fed Chair Kevin Warsh would need to hike interest rates to fight inflation. In fact, three members of the Federal Open Market Committee (FOMC) voted to raise interest rates at the Federal Reserve's latest monetary policy meeting. However, the latest data from betting markets suggest that a September rate hike is highly unlikely. According to the Polymarket betting market, September rate-hike odds plunged from nearly 60% in early August to ~35% today.
AI Stocks Stabilize
A key part of the market to watch is the AI industry. AI investment accounted for a whopping 50% of Q1 GDP growth. Tech stocks are coming off one of their most volatile months in years. However, leading AI stocks are showing signs of stabilization. For instance, Palantir jumped 30% after smashing Wall Street expectations. After post-IPO corrections SpaceX and Cerebras are trying to round out the right side of IPO base structures. Meanwhile, NVIDIA, the leading AI stock, finally showed some life, jumping more than 10% this week.
Bottom Line
Friday's job number was a rare 5-sigma miss. While the negative jobs number is bad news for the economy, it is positive for stocks because it means the Fed is less likely to raise interest rates.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.