Stocks drop, Nasdaq in a correction after jobs report

STORY: U.S. stocks plummeted for second straight session on Friday, and the Nasdaq confirmed it was in correction territory, after a soft jobs report stoked fears of an oncoming recession.

The Dow dropped 1.5%, the S&P 500 shed more than 1.8% and the Nasdaq nosedived more than 2.4% and is now down more than 10% from its recent high.

The Labor Department said non-farm payrolls increased by 114,000 jobs last month, well short of the average forecast of 175,000 by economists polled by Reuters.

And the unemployment rate jumped up to a near three-year high of 4.3%.

The data added to concerns the economy was weakening faster than expected, with investors now betting the Federal Reserve may cut rates in September by 50 basis points – double the previous estimate.

But Eric Lynch, managing director of Scharf Investments, said Friday’s selloff marked a “healthy recalibration” for a stock market driven almost solely by Big Tech… and that the underwhelming jobs report did not necessarily portend “gloom and doom” for the economy.

“I think it’s important to understand that a few data prints don’t make a trend. Definitely things are slowing. There is still potential for a soft landing. It is more murky than it was a few days ago, but again, because you had this very bifurcated equity market kind of dynamic for a while now, between tech and everything else, that ‘everything else’ stuff looks attractive. And it could grow.”

That “everything else” trade on Friday included the S&P’s consumer staples, utilities and real estate sectors which all advanced as investors snapped up defensive stocks.

But Big Tech took a big tumble, with shares of Amazon falling more than 8.5%, and Intel spiraling 26% after both companies issued disappointing forecasts.

Chip stocks also continued their recent decline. The Philadelphia Semiconductor Index closed at a three-month low after its biggest two-day slide since March of 2020.

One tech bright spot was Apple, up more than half a percent after posting better-than-expected third-quarter iPhone sales.