In the early hours of August 8 Beijing time, the U.S. Bureau of Labor Statistics released July nonfarm payroll data that surprised the market: nonfarm payrolls fell by 23,000, far below market expectations of an increase of 80,000, while the prior reading was revised down from +57,000 to +20,000; the unemployment rate fell from 4.2% to 4.1%. After the data release, the U.S. dollar index tumbled sharply, spot gold jumped more than 2.5% at one point, silver rose over 4% at times, and safe-haven sentiment and rate-cut expectations both intensified.
However, unlike the conventional logic that "bad data means bad markets," U.S. stocks showed rare resilience after the employment data shock. The three major indices opened higher across the board, with the Nasdaq rising more than 1.3% intraday, the S&P 500 up about 0.7%, and the Dow climbing in tandem. At the individual stock level, SpaceX surged over 7%, while large tech stocks such as Nvidia, Amazon, and Tesla generally rose. The CME FedWatch tool showed that after the data, market odds of the Fed keeping rates unchanged in September rose to about 60%, and rate-hike expectations cooled markedly.
Employment "cold" but not "chilling": why the market chose an optimistic read
On the surface, the negative turn in employment data seems like a dangerous signal of economic cooling, but the market prefers to interpret it as a "tailwind for disinflation" rather than a "trigger for recession." At its late-July meeting, the Fed had already held the federal funds rate steady in the 3.5%-3.75% range for the fifth consecutive time. Although three officials voted for a hike, the overall stance leaned toward waiting. The unexpectedly weak nonfarm data conveniently cooled the hawkish narrative of "higher rates for longer," easing a key uncertainty that had been weighing on valuations.
Key variable: shifting from "fighting inflation" to "stabilizing growth"
For U.S. stocks, the market's focus is moving back from inflation to growth. The unemployment rate fell back to 4.1%, still within a historically low range, suggesting the labor market is undergoing a "moderate cooling" rather than a "sharp downturn." Combined with U.S. real GDP growth of 2.1% in the first quarter and a second-quarter pace that, while slower, is still expected to remain positive, recession trading has struggled to gain traction. This is the fundamental reason U.S. stocks can rally against the trend on bad news: the economic fundamental is "cold" but not "chilling," while the room for monetary policy imagination has been reopened.
Earnings supremacy: 85% beat estimates in earnings season
Another pillar supporting the U.S. stock bull market is corporate earnings. According to FactSet data, about 300 S&P 500 companies have reported second-quarter results so far, with roughly 85% beating earnings expectations. Overall profit growth is projected to exceed 47%, and net margins are on track to reach their highest level since the 2008 financial crisis.
Tech giants have also let performance speak for themselves. Alphabet reported second-quarter revenue of $119.796 billion, up 24% year over year, with net profit surging 298%; Microsoft posted quarterly revenue of $90.01 billion, up 18%; Amazon's revenue reached $200.606 billion, up 20%, with net profit jumping 245%. Thanks to strong results, Google's parent company briefly overtook Apple to become the world's second-most-valuable company, while Amazon's market cap crossed the $3 trillion mark for the first time.
Notably, a "song of ice and fire" is playing out within U.S. tech stocks: on one side, cloud and software giants hit record highs; on the other, the semiconductor sector remains under pressure, with memory names slumping sharply intraday. Market funds are rotating from "shovel sellers" (hardware/compute) to "gold miners" (AI application monetization), scrutinizing corporate free cash flow with a magnifying glass. This structural rotation from the virtual to the real is actually making the foundation of the U.S. stock rally more solid.
Why buy U.S. stocks: three pillars behind global funds' vote with their feet
Amid the repeated tug-of-war between employment and inflation data, global funds continue to increase allocations to U.S. equities. Behind this are three supporting logics worth the attention of Asian investors.
- The earnings moat of leading companies. U.S. stocks bring together the world's most competitive tech, consumer, and financial leaders. The AI investment wave is still in its early stages, corporate profit margins keep improving, and the certainty of earnings growth is second to none among major global markets.
- The allocative value of dollar assets. The U.S. dollar remains the world's most important reserve and settlement currency. As the "core representative" of dollar assets, U.S. stocks naturally offer safe-haven and value-preservation functions, making them an effective tool for Asian and Southeast Asian investors to diversify single-market risk and hedge currency fluctuations.
- Liquidity and institutional advantages. The U.S. stock market has deep liquidity, mature trading systems, and transparent information disclosure. Combined with a full range of tools such as ETFs and options, investors can participate efficiently and at low cost in the long-term growth of the world's top companies.
Institutional views are also leaning optimistic. A strategist at J.P. Morgan Private Bank said that even if the U.S. enters a "recurring inflation cycle" similar to the 1970s, rising inflation would not undermine the core supports of the U.S. stock bull market—economic growth, corporate earnings, and the AI investment wave—and expects the S&P 500 to rise more than 10% over the next 12 months, potentially challenging 8,200 points by mid-next year. RBC Capital Markets also reiterated its 8,150-point target for the S&P 500, arguing that recent volatility has actually created positioning opportunities.
Risk warning: buying U.S. stocks is not blindly chasing highs
Of course, buying U.S. stocks is not without risk. First, market concentration remains high, with tech giants exerting enormous influence on the index; if the AI narrative is debunked or earnings disappoint, the index could face a significant drawdown. Second, the inflation "roller coaster" is not over; if Middle East geopolitical conflicts push oil prices higher and inflation spirals again, the Fed cannot rule out resuming rate hikes, in which case high-valuation sectors would bear the brunt. Third, momentum trading is highly volatile: ETFs tracking U.S. stock momentum strategies fell more than 12% in July at one point, inflicting heavy losses on short-term traders who bought high and sold low.
For Asian investors, a more pragmatic approach is to build positions gradually with a long-term allocation mindset, prioritize leaders with high cash-flow quality and clear AI monetization logic, combine them with U.S. stock ETFs for diversification, and control position sizing according to one's own risk tolerance—rather than betting everything on a single sector or a single point in time.
Conclusion
The unexpected negative turn in nonfarm payrolls is like a mirror reflecting the "antifragile" nature of U.S. stocks: earnings supremacy, economic resilience, and reopened policy space—three forces combined make it hard for global funds to find an alternative. For investors asking "why buy U.S. stocks," the answer may lie not in short-term timing, but in whether they embrace the underlying logic of this combination: global quality assets plus dollar credit plus long-term compound interest. Of course, before entering, be sure to recognize the risks and act within your means.
