Wall Street Hits Record Highs Despite Job Market Weakness and Inflation Concerns

Wall Street once again showed its resilience. On Tuesday, all three major U.S. indexes closed at fresh record highs, even as the latest labor market data delivered the largest downward revision since 2002. Yet investors seem less concerned about weak statistics and more focused on how the Federal Reserve will respond — and expectations of rate cuts are what continue to fuel the rally. The S&P 500 rose 0.27% to 6,512 points, the Nasdaq Composite added 0.37% to close at 21,879 points, and the Dow Jones Industrial Average gained 0.43% to 45,711 points. The surge was led by health insurer UnitedHealth, whose shares jumped more than 8%. Tech giants like Nvidia and Broadcom also supported Nasdaq’s climb, continuing their role as the backbone of this year’s rally.

Largest Employment Revision Since 2002 At the same time, a harsh reality check arrived in the form of revised employment figures. The Bureau of Labor Statistics (BLS) reported that between March 2024 and March 2025, 911,000 fewer jobs were created than initially reported. This marks the largest downward revision in more than two decades. The hardest-hit sectors included hospitality, retail, and professional services. August figures showed only 22,000 new jobs — far below expectations — reinforcing the message that the U.S. labor market is weakening significantly. Markets, however, barely flinched. Investors believe that such weak data will push the Federal Reserve to act sooner, beginning to cut interest rates more aggressively. According to the CME FedWatch tool, the probability of a 25-basis-point rate cut in September is over 90%, and some traders are even betting on deeper cuts in the coming months. Fed Governor Christopher Waller has already hinted at several cuts over the next six months, saying he expects inflation to remain under control despite Trump’s new tariffs.

Inflation Data and the AI Boom The coming days will be critical for markets. On Wednesday, the Producer Price Index (PPI) is due, followed by the Consumer Price Index (CPI) on Thursday. If the data shows that inflation is reaccelerating, it could quickly undermine optimism and bring back fears of stagflation — the toxic mix of weak growth and rising prices. “The bull market has been extremely resilient this year, but we may be approaching an inflection point,” warned Chris Zaccarelli of Northlight Asset Management. Meanwhile, as Wall Street keeps one eye on inflation and the other on jobs, the artificial intelligence sector is experiencing its own frenzy. Shares of Nebius Group, an AI infrastructure company, surged nearly 50% on Tuesday after announcing a multibillion-dollar deal with Microsoft. Rival CoreWeave gained 8% on the same wave of enthusiasm for AI-related stocks. U.S. stock markets now stand at a crossroads. Record highs reflect investor confidence in the power of the tech boom and imminent Fed rate cuts. Yet looming signals of a weakening labor market suggest that the economy could be heading onto dangerously thin ice before year’s end.

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