Market Overview - US stock market experienced a decline with the Dow Jones down 97.74 points (0.22%) at 44075.90, Nasdaq down 116.25 points (0.55%) at 20937.33, and S&P 500 down 30.13 points (0.48%) at 6299.81 [3] - The market had previously rebounded on Monday, with S&P 500 rising approximately 1.5% and Nasdaq gaining nearly 2% [3] - The market is closely monitoring earnings reports, with Palantir's stock surging after its revenue surpassed $1 billion for the first time [3][10] Earnings Reports - Palantir reported a quarterly revenue of $1 billion, a 48% year-over-year increase, and raised its full-year revenue guidance to $4.142-4.150 billion [10] - Caterpillar's earnings fell short of expectations [12] - Pfizer's second-quarter revenue exceeded expectations [11] - Rivian, AMD, and Snap are set to release their earnings reports [4][15] Trade Policies - President Trump announced plans to significantly increase tariffs on India, citing high tariffs as a major issue [5] - Trump indicated that tariffs on drug imports could eventually reach 250% [6] - A new tariff policy for chips and chip products is expected to be announced next week [7] Economic Indicators - The US trade deficit narrowed to $60.2 billion in June, a 16% decrease from the previous month, as imports fell by 3.7% [8] - MUFG reported that the market is increasingly betting on interest rate cuts from the Federal Reserve, with a 90% probability of a rate cut in September [9]

Core Viewpoint - MUFG reports that the significant underperformance of U.S. non-farm employment data in July has led to increased market expectations for interest rate cuts by the Federal Reserve within the year [1][4] Group 1: Employment Data and Economic Indicators - The July non-farm employment report showed only 73,000 jobs added, with prior months' data revised down by a total of 258,000 jobs, marking a historic downward revision of 90% [4] - The ISM manufacturing index's employment component fell to 43.4, indicating weakened labor demand, while the ISM price component dropped from 69.7 to 64.8, suggesting no significant inflationary pressure [4] Group 2: Market Reactions and Predictions - The interest rate futures market is pricing in approximately 64 basis points of easing by the end of 2025, with a 90% probability of a rate cut in September [1][5] - There is a growing expectation for at least two rate cuts by the end of the year, with traders increasingly betting on consecutive cuts in September and October [1][5] Group 3: Impact on Financial Markets - Gold prices have rebounded from around $3,270 to nearly $3,400 since the end of July, driven by rate cut expectations [5] - The U.S. dollar index fell by 0.8% on a single day, with the dollar depreciating against the yen by 2.2%, marking the largest drop since April [5] - The yield curve for U.S. Treasuries has steepened, with the 2-year Treasury yield dropping over 25 basis points, the largest decline since December 2023, indicating a bullish sentiment in the bond market [6] Group 4: Political Influences on Monetary Policy - Political dynamics in the U.S. are shifting towards supporting rate cut expectations, with President Trump exerting pressure on the Federal Reserve and calling for the dismissal of the Bureau of Labor Statistics chief [7] - The extreme weakness in the July employment report supports the argument for a rate cut, with some Federal Reserve officials advocating for immediate action [7]

Core Viewpoint - The recent weak U.S. non-farm payroll report has raised doubts about the momentum of U.S. economic growth, leading to a resurgence in interest rate cut expectations and a significant rise in U.S. Treasury prices [1] Group 1: Economic Indicators - The probability of a rate cut by the Federal Reserve in September has increased to 84%, with a growing likelihood of a 50 basis point cut [1] - The employment data has disrupted market calm, indicating that "bad news is bad news" has returned to the trading framework [1] Group 2: Market Reactions - A steepening bull market in U.S. Treasuries is underway, with short-term yields dropping significantly due to rate cut expectations [1] - The 2-year Treasury yield fell by over 25 basis points in a single day, while long-term Treasuries also showed a general recovery as investors repositioned their portfolios [1] Group 3: Future Projections - The market is re-evaluating the potential for multiple rate cuts by the Federal Reserve before the end of the year [1] - A large volume of Treasury issuance is expected this week, which may support the steepening of the yield curve [1]

Core Viewpoint - The unexpected weakness in the U.S. non-farm payroll report has reignited expectations for interest rate cuts by the Federal Reserve, leading to a significant rally in U.S. Treasury prices after a month of declines [1][2][3]. Group 1: Employment Data Impact - The July non-farm payroll report showed only 73,000 jobs added, with prior months' data revised down by a total of 258,000 jobs, marking a historic downward revision of 90% [1][2]. - This weak employment data has led traders to heavily bet on a Federal Reserve rate cut, with futures markets pricing in an 84% chance of a cut next month, up from less than 40% before the report [1][2][3]. Group 2: Market Reactions - The bond market reacted strongly, with the 2-year U.S. Treasury yield dropping over 25 basis points, the largest decline since December 2023, indicating a significant price rebound [6][7]. - The yield curve steepening strategy, which involves betting on the widening spread between short-term and long-term yields, has become attractive again for investors following the employment report [6][7][8]. Group 3: Future Rate Expectations - Market participants are now anticipating multiple rate cuts by the Federal Reserve before the end of the year, with expectations for cuts in September, October, and December [8][12]. - The pricing in the interest rate swap market suggests a cumulative cut of 61 basis points by December, with aggressive traders betting on a repeat of last year's rate cut scenario [12][13]. Group 4: Broader Market Sentiment - The weak employment data has shifted market sentiment, moving away from the "bad news is good news" narrative that previously supported equity valuations, as the focus returns to the negative implications of economic weakness [16][17]. - Institutional investors have been major buyers of U.S. Treasuries following the employment report, indicating a potential shift in market dynamics and positioning [17][18].