Traders work during the closing bell at the New York Stock Exchange (NYSE) on March 17, 2020 on Wall Street in New York.
Johannes Eisele AFP | Getty Images
Stocks fell sharply on Friday with the S&P 500 headed for its worst session in about two years as a much weaker-than-expected jobs report for July fueled concerns that the economy could slip into recession.
The broad market index fell 2.2%, while the Nasdaq Composite lost 2.6%. The Dow Jones Industrial Average fell 820 points, or 2%.
Friday’s sell-off pushed the Nasdaq into correction territory — down 10 percent from an all-time high hit nearly a month ago. The Nasdaq-100, which is made up of the 100 largest names in the Composite, was deeper in a correction, trading 11% below its 52-week high. The S&P 500 and Dow were 6% and 4% below all-time highs, respectively.
Nasdaq Composite this year.
Inventories sank after July U.S. job growth slowed more than expected, while the employment rate rose to the highest since October 2021. Nonfarm payrolls rose by just 114,000 last month, the Labor Department said. , a slowdown from 179,000 jobs added in June and below the 185,000 economists in a Dow Jones poll had expected. The unemployment rate rose to 4.3%.
Some megacap names saw heavy losses during the day viz AmazonThe second-quarter results fueled investor concerns about the booming levels of Big Tech’s AI-related capital. The e-commerce giant fell 12.5% after missing Street revenue estimates and issuing a disappointing forecast. Those losses were dragged into the consumer discretionary sector, which is headed for its worst day since May 18, 2022, when it fell 6.6%.
Intelmeanwhile, it cratered 29% after announcing weak guidance and layoffs. Nvidia it lost more than 5.5%, after losing 6% a day earlier.
The yield on the 10-year note fell to its lowest since December as investors flooded bonds for safety. The benchmark rate was last at 3.82%.
Friday’s declines are a “natural run” in a bull market rebounding from its sharp uptrend, said LPL Financial chief technical strategist Adam Turnquist.
“[The Nasdaq] was very overbought in July, same with semiconductors. And a lot of that AI excitement doesn’t really have a reality check at this stage,” Turnquist said, adding that “it’s not the end of the AI story.”
It’s been a volatile week, with the previous session’s heavy sell-off sending ripples through global stock markets. The stock market had rallied on Wednesday when the Federal Reserve gave a strong hint that it was going to cut interest rates at its next meeting in September, keeping interest rates at current levels. But after Friday’s weak jobs data, many investors are beginning to believe the central bank should have acted on Wednesday.
“Markets only get spooked by an unexpected Fed move when they think the Fed sees or smells something the markets haven’t caught,” said BMO Wealth Management chief investment officer Yung-Yu Ma. “In this case, it’s the markets that have caught something that the Fed is missing.”