US stocks experienced a significant decline across the board on Friday following the release of the July jobs report, which indicated a further cooling in the labor market. This news raised concerns among investors that the Federal Reserve’s current stance on interest rates, described as „higher for longer,“ could potentially lead to a recession. The central bank’s delay in initiating rate cuts was also a point of worry for market participants.
The tech-heavy Nasdaq Composite (^IXIC) dropped 2.6% after the release of the jobs report, pushing the index into correction territory, defined as a more than 10% drop from its recent high on July 10. The Dow Jones Industrial Average (^DJI) slumped 1.5%, losing over 600 points, while the S&P 500 (^GSPC) sank 1.8%. All three major indexes recorded weekly losses, with the S&P and the Dow falling 2% and the Nasdaq shedding 3%. The Russell 2000 (RUT) fared even worse, posting a weekly loss of about 6.8%.
The disappointing jobs report showed that the US economy added fewer jobs than expected in July, with the unemployment rate unexpectedly rising to 4.3%, according to the Bureau of Labor Statistics‘ nonfarm payrolls report. These signs of a slowdown in the labor market are likely to fuel recession fears and increase expectations for rate cuts by the Federal Reserve.
Traders are now pricing in three rate cuts for this year, scheduled for September, November, and December, with bets on a 50 basis-point reduction in September. The yield on the benchmark 10-year Treasury (^TNX) dropped below the 4% level after the labor-market update, trading around 3.79%.
In addition to the economic data, news on individual stocks was also negative. Chipmaker Intel (INTC) reported disappointing earnings, leading to a significant drop in its stock price. The company announced plans to cut jobs and suspend dividends after missing its sales forecast and earnings expectations. Intel’s shares plummeted over 26%, dragging down other chip stocks in the market.
Amazon stock also slid nearly 9% following sales guidance that fell short of Wall Street estimates. On the other hand, Apple (AAPL) shares managed to stay relatively stable, gaining less than 1% after beating earnings expectations despite a decline in iPhone sales.
The stock market’s performance at the beginning of August was marked by a sell-off on Thursday, driven by concerns over the US economy’s weakening data. This raised questions about whether the Federal Reserve had kept interest rates too high for too long, potentially risking an economic downturn.
As the market continues to react to economic indicators and corporate earnings reports, investors are closely monitoring the situation and adjusting their strategies accordingly. The upcoming weeks will be crucial as more companies report their earnings, providing further insights into the state of the economy and the potential impact on the stock market.