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Traders work on the floor of the New York Stock Exchange (NYSE) on August 1, 2024 in New York City.
Jeenah Moon | Getty Images
Stocks fell sharply on Friday with the S&P 500 headed for its worst session in almost two years, as a much weaker-than-anticipated jobs report for July ignited worries that the economy could be falling into a recession.
The broad-market index dropped 2.4%, on pace for its biggest drop since December 2022. The Nasdaq Composite lost 2.9%, bringing the decline for the tech-heavy index from its recent all-time high to more than 10%. The Dow Jones Industrial Average fell 896 points, or 2.2%, and at one point was down 989 points.
Stocks sank after July job growth in the U.S. slowed more than expected, while the employment rate rose to the highest since October 2021. Nonfarm payrolls grew by just 114,000 last month, the Labor Department reported, a slowing from 179,000 jobs added in June and below the 185,000 expected by economists polled by Dow Jones. The unemployment rate increased to 4.3%.
The 10-year Treasury yield fell to its lowest since December as investors flooded into bonds for safety on the fear the Federal Reserve made a mistake this week by keeping interest rates at current levels.
Some mega cap names saw steep losses during the day, as Amazon‘s second-quarter results sparked investor concerns about Big Tech’s blowout levels of artificial intelligence-related capital spending. The e-commerce giant slid 12.5% after missing the Street’s revenue estimates and issuing a disappointing forecast. Intel, meanwhile, cratered roughly 27% after announcing weak guidance and layoffs. Nvidia lost more than 4%, following a 6% loss a day before.
The Nasdaq is the first of the three major benchmarks to enter correction territory — down more than 10% The S&P 500 and Dow were 6% and 4% below their all-time highs, respectively.
Nasdaq Composite this year.
Friday’s declines are a “natural course” in a bull market that is reverting after its steep uptrend, LPL Financial chief technical strategist Adam Turnquist said.
“[The Nasdaq] was very overbought coming into July, same thing with semiconductors. And a lot of that AI enthusiasm hasn’t really had a reality check at this stage,” Turnquist said, adding that “it’s not the end of the AI story.”
But it was more than just technology stocks that saw selling on Friday. Bank stocks were slammed on the recession fears with Bank of America and Wells Fargo down 5% apiece.
It’s been a volatile week with the S&P 500 moving more than 1% the last three trading sessions. The stock market had rallied Wednesday when the Fed gave a strong hint that a rate cut was coming at its next meeting in September. After Friday’s weak job figures, many investors are starting to believe the central bank should have acted on Wednesday.
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