S&P 500 Corrects On Nonfarm Payroll Déjà vu

S&P 500 Digests Payroll Revisions

The S&P 500 corrected sharply lower on Friday.

While the tariff announcement likely contributed to the correction, the announcement was overshadowed by economic data that is pointing to a weakening economy and the prospect of stagflation.

In advance of the Nonfarm Payroll Report, PCE data at the beginning of the week was hotter than expected, and the FED decision to hold interest rates was accompanied by a more hawkish stance from FED Chair Powell.

The Nonfarm Payroll Report for July came in at 73k (estimate 106k), and the unemployment rate moved up to 4.2%.

However, it is the revisions to the previous Nonfarm Payroll Reports that are more concerning.

The June payroll report has been revised down from 147k to 14k!

While the May payroll report was initially adjusted up last month to 144k from 139k, it has now been revised down to 19k!

Déjà vu

This is a pattern that we have seen before.

The July 2024 Nonfarm Payroll number of 114,000 also fell short of expectations and triggered the liquidations that followed in early August 2024.

The July report was subsequently revised down from 114,000 to 89,000.

The June 2024 payroll number was 206,000. That was revised down to 118,000.

The June 2024 payroll number, much like the June 2025 payroll number, was initially received as a signal that while the economy was slowing, it remained solid.

As noted in our September 2024 post, the level of downward revisions raises questions about the Nonfarm Payroll Report as a reliable indicator and guide to the economy’s health.

Given its recent and historical track record, it is surprising that the Federal Reserve and the markets place so much emphasis on it.

More concerning is that the monthly Nonfarm Payroll Report does influence future policy decisions, particularly those related to interest rates and fiscal stimulus.

No surprise, therefore, that on Friday, Trump ordered the firing of Erika McEntafer, the commissioner of the Bureau of Labor Statistics.

S&P 500 Key Levels

The S&P 500 opens in positive gamma today.

The gamma flip zone sits at 6200; the call resistance level is 6400, and the put support level is 6050.

From a technical analysis perspective, the most recent price action on the daily chart does signal caution.

The markets gapped up on opening each day last week before correcting to the downside. That pattern suggests that institutions are selling into retail buyers.  

Institutions are waiting for the markets to open, as that’s where the most volume and liquidity is, and then selling into the retail rally.

The reversal engulfing candle on Thursday was a strong reversal signal and insight into the price action on Friday.

The weight of probability is momentum to the downside.