U.S. stocks closed sharply lower on Friday following a disappointing July jobs report that amplified concerns about a slowing economy. The tech sector faced continued turmoil amid weak earnings reports, contributing to the broad market decline.
Major Indexes Drop
The Nasdaq Composite led the declines with a 2.4% drop, while the S&P 500 fell 1.8%, and the Dow Jones Industrial Average slipped 1.5%. This marked a challenging week for major indexes, with the Dow ending a four-week winning streak and the Nasdaq and S&P 500 each experiencing their third consecutive weekly declines. The Nasdaq, now 10% below its record close from July 10, has entered a technical correction.
Weak Jobs Report and Economic Data
The Bureau of Labor Statistics reported that U.S. employers added significantly fewer jobs than anticipated in July, with the unemployment rate rising to 4.3% from June’s 4.1%. This, combined with recent reports of weak manufacturing activity and decreased construction spending, signals a serious economic slowdown exacerbated by the Federal Reserve’s high-interest-rate policy.
The Fed has maintained its lending rate at its highest level since 2001 to combat inflation. Earlier this week, Fed Chair Jerome Powell noted progress on inflation and suggested that interest rates might be cut as early as September.
Market Reactions and Interest Rate Expectations
Financial markets are now pricing in a 70% chance that the Fed will lower its benchmark rate by half a percentage point at its September meeting, a sharp increase from the 22% probability factored in just a day earlier. The yield on 10-year Treasurys, reflecting expectations of rate cuts, fell to approximately 3.80%, its lowest level since December.
Tech Sector Rout
Tech stocks faced significant losses, with Intel (INTC) leading the decline. Intel’s shares plummeted 26% after the company reported a larger-than-expected quarterly loss and announced a 15% reduction in its workforce as part of a major cost-cutting strategy. Other semiconductor stocks, including Nvidia (NVDA), Micron (MU), and Super Micro Computer (SMCI), also saw declines.
Amazon (AMZN), another major Dow component, fell nearly 9% following weaker-than-expected quarterly revenue and cautious guidance for the current quarter. In contrast, Apple (AAPL) saw a modest gain after beating earnings expectations.
Commodity and Cryptocurrency Movements
Gold prices reached a new record high above $2,500, while crude oil prices dropped nearly 3%. Bitcoin fell to below $63,000 after earlier in the week approaching $70,000.
As investors digest the latest economic data and corporate earnings reports, market volatility is expected to continue, reflecting growing concerns about the impact of the Federal Reserve’s policies on the broader economy.
