The economy unexpectedly lost 23,000 jobs last month. The S&P 500 hit an all-time high. Here is why that is not as contradictory as it sounds –
When Bad News Becomes Good News: The Week the Jobs Report Rewired the Market
There is a phrase that experienced investors know well – “bad news is good news” – and this week illustrated it as vividly as any in recent memory. The U.S. economy unexpectedly shed 23,000 jobs in July. Stocks rallied sharply, posting their best week since April. The S&P 500 set a new all-time record close at 7,757.64. The explanation matters for every long-term investor.
This week’s capital market highlights:
-
July payrolls fell 23,000 – a major miss – Economists had forecast the U.S. economy would add approximately 80,000 – 83,000 jobs. Instead, employment declined by 23,000, and prior months were revised down by a combined 103,000. The unemployment rate fell slightly to 4.1% – but for a concerning reason: 264,000 workers exited the labor force entirely, pushing labor force participation to a 5.5-year low of 61.4%. Wage growth slowed to 3.2% annually, its lowest since May 2021.
-
S&P 500 closed at a new all-time record high (+3.58% for the week) – The index posted its best weekly gain since April, closing at 7,757.64 on Friday. The Nasdaq gained 5.19% for the week, led by a sharp rebound in technology and semiconductor stocks. The Dow rose 2.96%, recording its fifth consecutive positive session during the week.
-
September rate hike odds fell from ~50% to ~40% – Prior to Friday’s report, futures markets priced roughly even odds of a September hike or hold. After the jobs miss, CME FedWatch showed hold probability jumping to 60%; prediction market Kalshi moved to 65% for a hold. A hike in 2026 remains priced – December odds remain above 70% – but the near-term pressure eased materially.
-
Mid-week: ADP and ISM sent conflicting signals – Wednesday’s ADP private payrolls report showed just 44,000 new jobs (vs. 75,000 expected), the weakest reading of the year. The same day, the ISM Services prices index jumped to 70.3 – its highest level in three years – briefly raising stagflation concern. Markets wobbled intraday before Friday’s report provided resolution.
-
Oil fell as Iran tensions eased – Reports of a potential Strait of Hormuz reopening deal emerged mid-week, sending Brent crude lower and making energy the worst-performing S&P 500 sector for the week (approximately –3.4%). The prior weeks’ surge had been the primary inflation re-acceleration risk.
-
Q2 earnings far exceeded expectations – With more than 85% of S&P 500 companies having reported, Q2 earnings are tracking approximately 48% growth – more than double the 24% estimate heading into earnings season. A strong earnings backdrop helped sustain the equity rally independent of the rate narrative.
Why “bad news is good news” – and when it isn’t
The stock market does not simply reflect how the economy is doing today. It reflects expectations about how the economy – and more importantly, corporate earnings and monetary policy – will evolve over the next 12 to 18 months.
When a weak jobs report reduces the probability of higher interest rates, it can be positive for asset prices. Lower rate expectations improve valuations for stocks, reduce borrowing costs for companies, and suggest the Fed may give the economy more room. This week, that rate-relief logic outweighed the growth concern in the market’s judgment.
This dynamic is not permanent. A truly severe employment deterioration would be unambiguously negative – at some point a weakening economy hurts the corporate earnings that ultimately support stock prices. But this week’s data landed in a zone where the rate relief outweighed the growth concern.
An important nuance worth noting
The unemployment rate fell to 4.1% – but not because more people found work. It fell because 264,000 people stopped looking for jobs altogether. When the labor force shrinks, the unemployment rate can fall even as employment conditions worsen. This is one reason sophisticated analysts look beyond the headline unemployment number to labor force participation, wage trends, and payroll composition.
What long-term investors should take from this
The week illustrates why reacting to individual economic data points tends to be counterproductive. The same data that looked alarming Wednesday looked constructive by Friday. Two Fed events remain ahead: FOMC minutes on August 19 and the Jackson Hole Symposium on August 27- 28. Either could shift the rate narrative again.
A plan built around long-term fundamentals – rather than any week’s data releases – is more resilient to both the fear and the relief.
Disclaimer:This content is for educational purposes only and does not constitute personalized investment advice or a recommendation to buy or sell any security. The information provided reflects general market commentary based on publicly available information and is not tailored to the financial situation of any individual. Investing involves risk, including the possible loss of principal. Past market performance is not indicative of future results. Guardant Wealth Advisors, LLC is a registered investment adviser. Registration does not imply a certain level of skill or training.
Weekly Market Commentary: August 3 – 7, 2026
The economy unexpectedly lost 23,000 jobs last month. The S&P 500 hit an all-time high. Here is why that is not as contradictory as it sounds –
When Bad News Becomes Good News: The Week the Jobs Report Rewired the Market
There is a phrase that experienced investors know well – “bad news is good news” – and this week illustrated it as vividly as any in recent memory. The U.S. economy unexpectedly shed 23,000 jobs in July. Stocks rallied sharply, posting their best week since April. The S&P 500 set a new all-time record close at 7,757.64. The explanation matters for every long-term investor.
This week’s capital market highlights:
July payrolls fell 23,000 – a major miss – Economists had forecast the U.S. economy would add approximately 80,000 – 83,000 jobs. Instead, employment declined by 23,000, and prior months were revised down by a combined 103,000. The unemployment rate fell slightly to 4.1% – but for a concerning reason: 264,000 workers exited the labor force entirely, pushing labor force participation to a 5.5-year low of 61.4%. Wage growth slowed to 3.2% annually, its lowest since May 2021.
S&P 500 closed at a new all-time record high (+3.58% for the week) – The index posted its best weekly gain since April, closing at 7,757.64 on Friday. The Nasdaq gained 5.19% for the week, led by a sharp rebound in technology and semiconductor stocks. The Dow rose 2.96%, recording its fifth consecutive positive session during the week.
September rate hike odds fell from ~50% to ~40% – Prior to Friday’s report, futures markets priced roughly even odds of a September hike or hold. After the jobs miss, CME FedWatch showed hold probability jumping to 60%; prediction market Kalshi moved to 65% for a hold. A hike in 2026 remains priced – December odds remain above 70% – but the near-term pressure eased materially.
Mid-week: ADP and ISM sent conflicting signals – Wednesday’s ADP private payrolls report showed just 44,000 new jobs (vs. 75,000 expected), the weakest reading of the year. The same day, the ISM Services prices index jumped to 70.3 – its highest level in three years – briefly raising stagflation concern. Markets wobbled intraday before Friday’s report provided resolution.
Oil fell as Iran tensions eased – Reports of a potential Strait of Hormuz reopening deal emerged mid-week, sending Brent crude lower and making energy the worst-performing S&P 500 sector for the week (approximately –3.4%). The prior weeks’ surge had been the primary inflation re-acceleration risk.
Q2 earnings far exceeded expectations – With more than 85% of S&P 500 companies having reported, Q2 earnings are tracking approximately 48% growth – more than double the 24% estimate heading into earnings season. A strong earnings backdrop helped sustain the equity rally independent of the rate narrative.
Why “bad news is good news” – and when it isn’t
The stock market does not simply reflect how the economy is doing today. It reflects expectations about how the economy – and more importantly, corporate earnings and monetary policy – will evolve over the next 12 to 18 months.
When a weak jobs report reduces the probability of higher interest rates, it can be positive for asset prices. Lower rate expectations improve valuations for stocks, reduce borrowing costs for companies, and suggest the Fed may give the economy more room. This week, that rate-relief logic outweighed the growth concern in the market’s judgment.
This dynamic is not permanent. A truly severe employment deterioration would be unambiguously negative – at some point a weakening economy hurts the corporate earnings that ultimately support stock prices. But this week’s data landed in a zone where the rate relief outweighed the growth concern.
An important nuance worth noting
The unemployment rate fell to 4.1% – but not because more people found work. It fell because 264,000 people stopped looking for jobs altogether. When the labor force shrinks, the unemployment rate can fall even as employment conditions worsen. This is one reason sophisticated analysts look beyond the headline unemployment number to labor force participation, wage trends, and payroll composition.
What long-term investors should take from this
The week illustrates why reacting to individual economic data points tends to be counterproductive. The same data that looked alarming Wednesday looked constructive by Friday. Two Fed events remain ahead: FOMC minutes on August 19 and the Jackson Hole Symposium on August 27- 28. Either could shift the rate narrative again.
A plan built around long-term fundamentals – rather than any week’s data releases – is more resilient to both the fear and the relief.
Disclaimer:This content is for educational purposes only and does not constitute personalized investment advice or a recommendation to buy or sell any security. The information provided reflects general market commentary based on publicly available information and is not tailored to the financial situation of any individual. Investing involves risk, including the possible loss of principal. Past market performance is not indicative of future results. Guardant Wealth Advisors, LLC is a registered investment adviser. Registration does not imply a certain level of skill or training.
more posts:
Weekly Market Commentary: July 20 – 24, 2026
Weekly Market Commentary: July 13 – 17, 2026
Student of the Market: July 2026