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S&P 500, Dow, Nasdaq slide after weak jobs report triggers recession fears

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S&P 500, Dow, Nasdaq slide after weak jobs report triggers recession fears

Ankika Biswas, Shubham Batra and Medha Singh
 |  Reuters

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Aug 2 (Reuters) – The Nasdaq Composite was on track tofall into a correction in a Wall Street battering after Friday’sweak jobs numbers deepened worries of a slowdown in the U.S.economy, while Amazon and Intel’s downbeat forecasts worsenedinvestor sentiment.

The tech-laden index slumped over 10% from its Julypeak, putting it on track to confirm it is in a correction afterconcerns arose about pricey Big Tech valuations and a coolingeconomy.

“This isn’t that unusual as we passed the economic torchfrom the perception of growth to needing government interventionwith lower interest rates to stabilize the economy,” said TomPlumb, chief executive and portfolio manager at Plumb Funds.

“As we go through the fall and start to see some impactof the Fed taking actions (on rate cuts), we can see a recoveryfrom current levels to well over 18,000 points by year-end.”

At 11:51 a.m. the Dow Jones Industrial Averagefell 833.37 points, or 2.07%, to 39,514.60, the S&P 500lost 112.95 points, or 2.07%, to 5,333.73 and the NasdaqComposite lost 409.46 points, or 2.38%, to 16,784.69.

The S&P 500 hit its lowest level since June 5. Both thebenchmark index and the blue-chip Dow were on track for theirbiggest two-day slides in nearly two years.

Why was the jobs report worrisome?

The nonfarm payrolls report showed the U.S. job marketslowed sharply last month, while a separate reading revealed neworders for U.S.-manufactured goods fell more than expected inJune, deepening fears about the health of the economy sparked byThursday’s weak manufacturing data.

With fresh evidence of the labor market weakening, tradersare now betting the U.S. Federal Reserve will deliver ahalf-percentage-point rate cut in September, versus the 25-bpscut expected before the data.

“Now the question isn’t will they cut in September, but byhow much. With the Sahm rule officially being triggered, boththe talk of recession and criticism of the Fed will growlouder,” said Jay Woods, chief global strategist, FreedomCapital Markets.

The Sahm rule is a historically accurate early indicator ofrecession.

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Declines by the numbers

The small-cap Russell 2000 index slumped 4% to hit anearly one-month low and was set for its biggest two-day slidesince June 2022.

Amazon.com fell 9% after it reported slowing onlinesales growth in the second quarter and said cautious consumerswere seeking cheaper purchase options.

Intel tumbled 26% after forecasting third-quarterrevenue below estimates and suspending its dividend, starting inthe fourth quarter.

Other chip stocks were also set to extend Thursday’slosses. Nvidia and Broadcom lost 2% each,while Micron Technology and Arm Holdings weredown around 7% each.

The Philadelphia SE Semiconductor Index hit athree-month low, set for its biggest two-day slide since March2020.

Bucking the negative trend in megacaps, Apple rose2.3% after posting better-than-expected third-quarter iPhonesales and forecasting more gains, betting on AI to attractbuyers.

Disquiet about the dominance of the “Magnificent Seven”group of stocks persists as earnings from most of the Big Techcompanies have failed to enthuse investors, underlining worriesabout their valuations being inflated.

All the 11 S&P 500 sub-indexes slumped, with the ConsumerDiscretionary sector leading losses and on track forits biggest two-day drop since June 2022.

Major U.S. banks also fell for the second straight day onrecession concerns, with the S&P 500 Financials andBanks indexes losing 3% and 4.7%, respectively.

Wall Street’s “fear gauge” breached the long-termaverage level of 20 points to touch its highest mark since lastMarch.

Among other movers, Snap lost 24.7% afterforecasting current-quarter results below expectations.

Chevron Corp fell 3.5% after the oil giant missedestimates for second-quarter profit.

Declining issues outnumbered advancers by a 4.23-to-1ratio on the NYSE, and by a 5.74-to-1 ratio on the Nasdaq.

The S&P 500 posted 57 new 52-week highs and 15 new lows,while the Nasdaq Composite recorded 27 new highs and 248 newlows.

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