NEW YORK: US stocks fell on Friday, weighed down by a jobs report that showed a continued labour market slowdown but left traders uncertain about how far the Federal Reserve will go in cutting interest rates.
All three main indexes were lower, with the 11 sectors of the benchmark S&P 500 losing ground led by declines in communication services, consumer discretionary and technology equities.
The S&P 500 and the Dow had their biggest weekly drop since March 2023, with the Nasdaq
registering its biggest weekly drop since January 2022.
US Labor Department data showed US employers added 142,000 jobs in August, shy of analyst expectations, while jobs growth for July was revised down to 89,000, also below estimates.
The report means Federal Reserve chair Jerome Powell must cut rates later this month, but also suggests he may be too late
for the economy to achieve a soft landing, said Lou Basenese, president
and chief market strategist at MDB Capital in New York.
“If we start seeing layoffs in the next month or two, it’s going to suggest his timing was too late. Stocks are going to go down until next week when the Fed makes it definitive that they’re cutting, which could put pressure on them to do 50 basis points versus 25 bps. I think 25 bps is all but guaranteed,” Basenese said.
Fed Governor Christopher Waller said on Friday “the time has come” for the US central bank to begin a series of interest rate
cuts, adding he is open-minded about the size and pace.
Traders’ bets for a 25-basis point rate cut in September stood at 73 per cent, according to the CME Group’s FedWatch Tool, while those for a 50-bps reduction in rates were at 27 per cent, down from a brief rise to 51 per cent after the report.
“I still think the Fed is going to move 25 basis points,” said Tony Roth, chief investment officer at Wilmington Trust in Radnor, Pennsylvania. “I don’t think that the Fed is really ready at this point to push the panic button.”
The Dow Jones Industrial Average fell 410.34 points, or 1.01 per cent, to 40,345.41, the S&P 500 lost 94.99 points, or 1.73 per cent, to 5,408.42 and the Nasdaq Composite lost 436.83 points, or 2.55 per cent, to 16,690.83.
Losses in leading megacap growth stocks dragged the indexes, including the so-called Magnificent Seven: Nvidia fell 4.0 per cent, Tesla slumped 8.4 per cent, Alphabet lost 4.0 per cent, Amazon shed 3.7 per cent, Meta declined 3.2 per cent, Microsoft dropped 1.6 per cent, and Apple weakened 0.7 per cent.