The US stock market tumbled on Friday after a disappointing jobs report showed more cooling in the labor market, fueling concerns that the Federal Reserve’s “higher for longer” interest rate stance might end in recession. The Nasdaq Composite dropped 2.9%, plunging the tech-heavy index into correction territory, more than 10% below its recent high in early July.
The Dow Jones Industrial Average slumped nearly 2.4%, or close to 1000 points, as a flight from stocks accelerated. The S&P 500 sank 2.5%. The sell-off was pronounced in the tech world, with Amazon leading the losses, down 11% after the company shared a current quarter forecast that fell short of expectations on both the top and bottom lines.
Intel‘s shares plummeted more than 25% after the company reported its second-quarter earnings, missing on the top and bottom lines and announcing a $10 billion cost reduction plan to cut 15% of its workforce and suspend dividend payments. Apple was the only Big Tech company that gained, rising 2% compared to heavy losses from other tech giants.
The jobs report showed the US economy added fewer jobs than expected in July, while the unemployment rate unexpectedly rose to 4.3%, the highest level in nearly three years. The news reinforced concerns among some Fed watchers that the central bank may have waited too long to start lowering interest rates.
Fed Chair Jerome Powell said Wednesday that a cut in September was “on the table” as long as the data supported it, while acknowledging that there was a discussion at this week’s meeting about whether to move in July. Policymakers decided instead to keep rates at a 23-year high.
The Friday jobs report “just about guarantees you are going to get a 25-basis-point September cut” and also puts on the table cuts in November and December, according to RSM chief economist Joe Brusuelas. There is even a “rational argument” to be made that a 50-basis-point cut could be made at the Sept. 17-18 meeting, Brusuelas added.
Traders did adjust their bets on Friday after digesting the jobs numbers. They now estimate a 70% chance of a half-percentage-point cut next month, according to rate futures contracts.
