The market experienced a sharp pullback last week, with all major U.S. indexes closing lower as concerns over weakening employment data and geopolitical risks weighed on investor sentiment. The latest jobs report showed significant downward revisions of 258,000 positions from previous months, indicating a sharper slowdown in the labor market than initially expected. The Birth/Death model’s optimistic job additions have been met with skepticism, further fueling concerns. This weakening labor trend has increased the likelihood of Federal Reserve rate cuts, with expectations of a 0.50% to 1.00% reduction to counter a potentially fast-decelerating economy. Despite the broader market’s decline, gold and bonds gained, signaling a shift toward safe-haven assets.

Technical indicators suggest that the S&P 500’s recent rally may be losing momentum, with the index breaking its 20-day moving average and touching its long-term trendline resistance. Portfolio managers are raising cash in anticipation of a potential 5% to 10% market correction during the seasonally weak August-September period, compounded by high valuations. However, certain sectors and stocks remain attractive. AI-related companies like Google, Microsoft, and Meta continue to lead, while homebuilders, small caps, and select retailers such as American Eagle and Abercrombie & Fitch are showing strong demand signals. Additionally, undervalued opportunities like Baxter (BAX) are being accumulated as part of tactical strategies.

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