U.S. stock indexes tumbled Friday, with the Nasdaq Composite (COMP:IND) driving into correction territory after the July’s jobs report underscored worries the U.S. economy is heading for a hard landing.
Nasdaq Composite (COMP:IND) was -2.8%, the S&P 500 (SP500) was -2.5%, and the Dow Jones Industrial (DJI) was -2.4%, losing more than 900 points. Intel (INTC) was the worst-performing stock on each index, crashing nearly 30% after its quarterly financial update. The Consumer Discretionary sector (XLY) dropped more than 5%, leading all 11 S&P 500 (SP500) groups lower.
The Nasdaq Composite (COMP:IND) and Nasdaq-100 (NDX) -home to mega-cap and AI tech leaders including Nvidia (NVDA) – were on track to confirm a correction, with each down at least 10% from their all-time highs logged in July.
Friday’s selloff was ignited after the nonfarm payrolls report showed the economy added 114K jobs in July, markedly less than the 180K economists had expected and cooling from 179K in June. The unemployment rate rose to 4.3% vs. the 4.1% expected.
“The ongoing deterioration in the jobs market was on full display in the July Employment report,” Wells Fargo Senior Economists Sarah House and Michael Pugliese said in a note. “The unemployment rate jumped to 4.3% to formally surpass the Sahm Rule threshold historically associated with the economy being in a recession.”
In another gauge of Friday’s selloff, Wall Street’s volatility gauge (VIX) jumped to 25 for the first time since March 2023. J.P. Morgan on Friday said it now expects the Fed to cut the fed funds rate by 50bp at both its September and November meetings, followed by 25bp cuts at every meeting after that.
“There are only two words that come to mind when you look at the US NFP data, which are: growth scare and terrible number,” Naeem Aslam, chief investment officer at Zaye Capital Markets, said in a note. “Looking at the numbers, it is very clear now that the Fed has made another policy mistake and rates should have been cut, and there is no time left. In other words, now traders and investors are worried about recession fears.”
On the Treasury front, the 10-year Treasury yield (US10Y) fell 15 basis points to 3.83%. The 2-year yield (US2Y) slid 26 basis points to 3.89%. The US10Y has now fallen to its lowest level in 2024 while the US2Y breaks below 4%. See how Treasury yields have done across the curve on the Seeking Alpha bond page.
Stocks dropped sharply Thursday as soft economic data reignited questions about the Federal Reserve’s decision to wait longer on cutting interest rates.
Among individual movers, Intel (INTC) crashed -27%, after the semiconductor makers issued weaker-than-expected guidance for the current quarter, said it’s laying off workers and suspending its dividend.
Amazon (AMZN) dropped -11%, after it reported mixed Q2 earnings and Q3 guidance that came below the consensus.
Apple (AAPL) gained +2.6% offered some respite after its Q3 results topped expectations.
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