July payrolls unexpectedly fell by 23,000, versus expectations for an increase of about 80,000. The unemployment rate slipped to 4.1%, partly because people left the labour force, while previous months were revised lower.

That pushed the implied probability of a September Fed hike down to roughly 40%–44%, compared with about two-thirds a week earlier. The The semiconductor picture is improving following the recent correction, but volatility remains high.

AI-related demand remains visible in memory, cloud infrastructure and data-centre investment. Sandisk, for example, forecast revenue above expectations because of strong memory demand from AI data centres, even though its shares subsequently sold off as investors focused on valuation and expectations.

10-year Treasury yield fell to about 4.64%, while the 2-year yield moved to about 4.20%.

This is positive for equities as long as investors interpret weaker employment as disinflation rather than recession.

Corporate earnings remain unusually strong. Around 85% of the 436 S&P 500 companies that have reported have beaten estimates, substantially above the historical average.