Traders on the floor of the New York Stock Exchange (NYSE) were met with a grim sight on August 1, 2024, as stocks fell sharply in response to a much weaker-than-anticipated jobs report for July. The broad market index dropped 1.84% to end at 5,346.56, with the Nasdaq Composite losing 2.43% to close at 16,776.16. The Dow Jones Industrial Average also took a hit, falling 610.71 points, or 1.51%, to finish at 39,737.26. At its lowest point of the day, the Dow was down a staggering 989 points.
The decline in stocks was triggered by the disappointing July job growth in the U.S., which slowed more than expected. Nonfarm payrolls grew by just 114,000 last month, a significant drop from the 179,000 jobs added in June and below the 185,000 expected by economists. The unemployment rate also rose to 4.3%, the highest since October 2021. This unexpected downturn in the job market raised concerns that the economy could be heading towards a recession.
Investors sought safety in bonds, causing the 10-year Treasury yield to fall to its lowest level since December. The fear that the Federal Reserve had made a mistake by keeping interest rates unchanged this week further fueled the sell-off in stocks.
Some of the biggest names in the market saw steep losses on Friday. Amazon’s second-quarter results fell short of expectations, leading to an 8.8% drop in its stock price. Intel also faced a significant decline of 26% after announcing weak guidance and layoffs. Nvidia, another tech giant, lost 1.8% following a 6% loss the day before.
The Nasdaq Composite was the first of the major benchmarks to enter correction territory, down more than 10% from its record high. The S&P 500 and Dow Jones were also down 5.7% and 3.9% from their respective all-time highs.
Despite the sharp decline in tech stocks, LPL Financial chief technical strategist Adam Turnquist believes that this pullback is a natural course in a bull market that is reverting after a steep uptrend. He noted that the Nasdaq was overbought coming into July, and the enthusiasm for AI-related stocks had not yet been tempered by reality.
The sell-off on Friday was not limited to tech stocks, as bank stocks also took a hit on recession fears. Bank of America was down 4.9%, while Wells Fargo saw a 6.4% decline.
Overall, it was a volatile week for the stock market, with the S&P 500 moving more than 1% in each of the past three trading sessions. The market had rallied earlier in the week when the Fed hinted at a rate cut in September. However, after the weak job figures on Friday, many investors are now questioning whether the central bank should have acted sooner.
In conclusion, the stock market’s reaction to the disappointing jobs report highlights the fragility of the current economic environment. Investors are now bracing for further volatility as they assess the implications of the slowdown in job growth and the potential for a recession.