Jobs Report Misses Forecasts, but Tariffs Remain Market’s Biggest Concern

AI stocks are slumping while the S&P 500 tests the critical support level

• Market volatility persists amid tariff uncertainty, depressing AI stocks and broader indices.
• Keep an eye on the S&P 500’s 200-day moving average to understand this market.
• Jobs report data missed forecasts, but concern over tariffs remains the dominant market driver.

Stocks remained volatile yesterday, with the S&P 500 falling 1.8%. Ten of the 11 sectors declined, with energy as the sole gainer, up 0.5%. The Nasdaq Composite performed even worse, dropping 2.6%, while the Russell 2000 and Dow Jones Industrial Average lost 1.5% and 1%, respectively.

This broad-based weakness extended to the U.S. dollar, which closed at its lowest level since the election and marked its worst four-day stretch since 2022. Investors now look ahead to how the market will digest the latest jobs report.

AI fades as a market mover

Optimism around artificial intelligence (AI), which fueled last year’s gains, has taken a back seat as the market struggles with the uncertainty surrounding tariffs. AI stocks suffered, with Palantir (PLTR) dropping 11% and Marvell Technology (MRVL) plunging 20%. The Magnificent Seven, several of which are AI-related, are collectively down 10% for the year.

However, Broadcom (AVGO), a semiconductor, software and security company, delivered positive AI-related news, beating earnings forecasts and issuing an optimistic outlook. Shares of Broadcom surged 11% in premarket trading.

Uncertainty is the market’s biggest enemy, and the ongoing tariff debate is a prime example. Without clear policy direction, choppy trading is likely to persist. Companies are increasingly citing tariffs as a concern during earnings reports.

Costco (COST), which reported quarterly earnings overnight, warned of shrinking profit margins and a cautious consumer outlook, sending its stock down 2% in premarket trading. Hewlett Packard (HPQ) echoed similar concerns, noting lower future margins, leading to a steep 20% decline in premarket trading.

Amid the negative sentiment, Gap Inc. (GAP) stood out with strong earnings, surpassing expectations for both revenue and profit. Under CEO Richard Dickson’s leadership, the company appears to be making a turnaround. Historically, Gap has faced challenges but has demonstrated resilience time and again.

Another major corporate development came from Walgreens Boots Alliance (WBA), which announced a $10 billion deal to go private with Sycamore Partners. This is a significant shift for a company valued at $106 billion as recently as 2015.

Turning back to market technicals, the S&P 500 has touched its 200-day moving average (DMA) for three consecutive days. Many traders watch DMAs closely, and repeated tests often lead to breakouts—potentially signaling further downside risk.

The jobs report

The key data point today is the jobs report. Forecasts projected 159,000 new jobs and a 4% unemployment rate. However, actual figures showed 151,000 jobs and a 4.1% unemployment rate. Markets initially reacted positively, but uncertainty over tariffs remains a pressing concern.

With the VIX at 25, volatility is expected to persist. A break below the S&P 500’s 200 DMA at 5730 could trigger additional selling pressure.

As always, investors should focus on long-term objectives and avoid reacting to short-term fluctuations.

JJ Kinahan is CEO of tastytrade from IG—which includes tastylive, tastyfx and tastycrypto. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee. @thejjkinahan

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