Revisions to recent estimates of U.S. job growth indicate the employment situation is weaker than markets had reason to believe. In the short term, that probably means the federal funds rate is heading lower from here.
The bigger-picture concern – with incoming producer and consumer price data due on Wednesday and Thursday – is a combination of slowing growth and rising inflation.
Results of the Quarterly Census of Employment and Wages (QCEW) conducted by the Bureau of Labor Statistics show the economy added 911,000 fewer jobs than previously reported from April 2024 through March 2025.
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LPL Financial Chief Economist Jeffrey Roach, noting "another year of outsized revisions to payrolls," compared the current adjustment of minus 0.6% to an average of plus or minus 0.2% over the past decade.
"The preliminary benchmark revision … likely pulls down the average monthly gain to 71,000 from the initial estimate of 147,000." Information technologies, wholesale trade and leisure and hospitality had the highest rates of negative revisions, while transportation and warehousing were revised upward.
"For perspective," Roach adds, "last year's preliminary estimate was roughly 800,000 fewer payroll jobs than initially reported. It turns out the preliminary estimate last year was too large but still, the labor market was weaker than we thought and that trend continues."
The economic calendar now turns to the release of the Producer Price Index (PPI) Wednesday morning and the Consumer Price Index (CPI) Thursday morning.
"The jobs picture keeps deteriorating," notes Northlight Asset Management Chief Investment Officer Chris Zaccarelli, "and while that should make it easier for the Fed to cut rates this fall, it could also throw some cold water on the recent rally. Worse still, if the CPI shows a worsening trend of higher inflation on Thursday then the market will begin worrying about stagflation. The bull market has been extremely resilient this year, but we could be approaching an inflection point where it is tested again."
The Federal Open Market Committee will meet to discuss the federal funds rate next week. According to CME FedWatch, the probability of a 25 basis point cut is 92.0%, a jumbo move – 50 basis points – is at 8.0%.
At Tuesday's closing bell, the Dow Jones Industrial Average was up 0.4% to 45,711, a new closing high for the blue-chip index. The broad-based S&P 500 had added 0.3% to 6,512, also a new closing high, and the tech-heavy Nasdaq Composite rose 0.4% to 21,879, extending the record high it reached Monday.
UNH stock looks healthy again
UnitedHealth Group (UNH, +8.7%) was No. 1 among the 30 Dow Jones stocks Tuesday after it reaffirmed full-year earnings guidance and revealed positive preliminary ratings from the Centers for Medicare & Medicaid Services in a "material event" filing with the Securities and Exchange Commission.
According to management, UNH will have approximately 78% of its policyholders in 4-star or higher Medicare Advantage plans, consistent with expectations and in line with historical performance.
TD Cowen analyst Ryan Langston estimated that approximately 84% of UnitedHealth's Medicare Advantage members were in 4-star plans or higher in 2025. Langston characterized the decline as "a manageable headwind" that, based on today's price action, appears to be well within market expectations.
UNH is now up more than 46% since its early August lows. Good news for Warren Buffett's Berkshire Hathaway (BRK.B) equity portfolio, which bought UnitedHealth shares in Q2.
Awe-dropping AAPL
Apple (AAPL) turned positive shortly after the scheduled beginning of its "awe-dropping" hardware event, but one of the 10 best tech stocks of all time sagged into the closing bell to post a 1.5% loss.
Jefferies analyst Edison Lee reiterated his Hold rating and his $205.82 12-month target price for AAPL stock.
Lee notes that a recent ruling by a federal court in the Justice Department's antitrust case against Alphabet (GOOGL, +2.4%) removes the risk that Alphabet will no longer be able to pay Apple to use Chrome as the search engine on its iPhones.
Apple also plans to use the Google parent's Gemini large language model to support its AI-driven Siri service, "sparing the company from developing its own solution."
Meanwhile, a recent survey suggests 68% of U.S. iPhone users intend to upgrade to the iPhone 17 at launch. Lee forecast iPhone 17 volume will grow 54% year over year (YoY) in the September quarter and total iPhone shipments to rise 4% YoY.
"Our fiscal 2026 and 2027 earnings per share estimates remain in line with consensus," Lee concludes. "That being said, we find valuation stretched" with AAPL stock trading at 30 times estimated fiscal 2026 forward earnings.
Big M&A moves
Teck Resources (TECK) was up 11.3% after the Canadian company announced an all-stock "merger of equals" with Anglo American that will create the world's fifth-largest copper miner.
The combined Anglo Teck will have a market cap of approximately $53 billion and an estimated annual copper output of 1.2 million metric tons.
TCK shareholders will receive 1.3301 Anglo shares per TCK share. Anglo shareholders will receive a $4.5 billion special dividend. Anglo shareholders will own 62.4% of Anglo Teck, TCK shareholders 37.6%. Anglo American was up 9.1% on the London Stock Exchange.
"We view this merger as strategically compelling," writes CFRA Research analyst Matthew Miller, "creating a copper-focused platform that is well positioned for long-term demand growth driven by electrification trends."
The transaction is expected to close within 12 to 18 months. As Miller notes, "The deal targets $2.2 billion in synergies, including $800 million in recurring annual savings and $1.4 billion in operational synergies."
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