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Stocks finished sharply lower on Friday following a shocking jobs report that missed expectations, accompanied by significant downward revisions for May and June. Upon closer examination of the data, it became apparent that almost no jobs were created in May and June, with only 19,000 in May and 14,000 in June—substantially lower than the previously reported figures of 139,000 and 147,000, respectively. July’s numbers were hardly better, with only 73,000 jobs added.
 

The revisions released on Friday aligned much more closely with recent data from ADP and Paychex.
 

Interestingly, the other data released wasn’t notably weak or significantly different from recent months, especially when looking at wage growth and the household survey. The number of employed workers continued its downward trend, while the number of unemployed workers returned to levels last seen in May. So nothing fundamental may have changed in the overall labor market. More likely, the non-farm payroll report was overstating job creation—a reality we were already aware of.
 

Wage even picked up, rising by 3.9% y/y.
 

However, the market didn’t take these numbers in stride, perhaps because investors are finally acknowledging that conditions aren’t as rosy as they initially appeared. It’s hard to say for sure. Equally uncertain is whether Powell knew about these employment numbers during Wednesday’s Fed meeting.

The 2-year rate was smoked, tumbling 28 bps on Friday alone as the market frantically shifted its expectations from one rate cut in 2025 to two. The 2-year note now sits at a critical juncture; every time it’s approached support around 3.6%, it has bounced back. However, with a descending triangle formation now evident, a break below this support can’t be ruled out—nor can a potential drop toward 2.8%.
 

The 10-year yield is currently holding solid support around 4.20%, but a break below this level would likely send rates down toward 3.9%. That area probably marks the lower boundary of the current range. The rationale is straightforward—the Fed Funds futures for 2026 continue to price in rates stabilizing near 3%. Given that the 10-year typically peaks roughly 300 bps above the Fed Funds rate, significant downside beyond 3.9% seems unlikely at this point.
 

The S&P 500 formed a bearish engulfing candle on its weekly chart, a pattern that historically has served as a strong bearish indicator. In most cases, we’ve seen the index decline the following week, and in several instances, significant declines unfolded over subsequent weeks.
 

The index also closed below its 20-day moving average for the first time since mid-April. A break below support at 6,200 would likely set up a gap fill toward 6,020.
 

To this point, the Treasury General Account (TGA) has risen by roughly $220 billion—from about $280 billion to $497 billion as of July 31. It still needs to climb by approximately another $350 billion, meaning we’re not even halfway through the refill process. Additionally, on Friday, the reverse repo facility dropped below $100 billion. Given this, there’s a strong likelihood that the remainder of the TGA refill will drain liquidity directly from reserves held at the Fed.
 

Based on my estimates, there’s a strong possibility that reserves have already dropped below $3.2 trillion. However, we’ll have to wait until next week’s data release for confirmation, and naturally, these levels will fluctuate throughout the week.
 

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