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US stock market on Friday registered one of its worst performances, with technology stocks taking the hardest hit followed by a US job market report that came in weaker than expected, adding to concerns about the economy. The decline was largely attributed to weak performance of some large tech stocks that had been benefiting from the AI boom.
The S&P 500 declined 1.7% or 94.99 points to close at 5,408.42 marking its worst week since March 2023, while the Nasdaq fell 2.6% or 436.83 points, settling at 16,690.83, led by tech companies like Broadcom and Nvidia.The Dow Jones Industrial Average also shed 410 points (1%) after initially gaining 250 points in the morning, ending at 40,345.41.
However, despite the market’s turbulent week, the S&P 500 remains just 4.6% below its record high set in July and is still up 13.4% for 2024 so far, which is considered a good performance.
The jobs report, considered the most important of the year, showed that US employers hired fewer workers in August than economists had predicted, marking the second consecutive month of lower-than-expected hiring. This data, along with recent reports indicating weakness in manufacturing and other economic sectors, has raised questions about the extent to which the Federal Reserve will cut its main interest rate at its upcoming meeting.
Meanwhile, the report also contained some positive indicators as the unemployment rate decreased from 4.3% to 4.2%, and August’s job growth, although weaker than anticipated, surpassed July’s figures.
The Federal Reserve has been working to curb high inflation by maintaining the federal funds rate at a two-decade high for over a year. However, the central bank is now expected to shift its focus towards protecting the job market and preventing a recession.
While interest rate cuts can boost investment prices, there are concerns on Wall Street that the Fed may be acting too late. If a recession does occur, it would negatively impact corporate profits and negate the benefits of lower rates.
“All is not well with the labor market,” said Brian Jacobsen, chief economist at Annex Wealth Management. “The Fed wanted the labor market to come into better balance, but any balancing act is unstable.”
Federal Reserve board member Christopher Waller highlighted the importance of being data-driven without overreacting to individual data points. He expressed his belief that the economy is not currently in a recession or necessarily heading towards one in the near future. Waller acknowledged the cooling labor market and suggested that a series of rate reductions may be appropriate, given that slowing job growth now appears to be a more significant concern than high inflation. However, he noted that the specific pace and extent of these cuts remain undetermined.
Broadcom declined 10.4% despite surpassing analysts’ expectations for profit and revenue in the recent quarter, partially attributed to AI. The company’s projected revenue of $14 billion for the current quarter fell slightly short of analysts’ forecasts of $14.11 billion, according to FactSet. Consequently, Broadcom’s stock suffered a substantial weekly drop of 15.9%.
Additionally, other chip companies, including Nvidia, also fell on Friday, with Nvidia’s stock falling by 4.1%. Following a surge earlier in the year due to increased revenue driven by the AI frenzy, Nvidia’s stock has been volatile since mid-July as investors reassess its valuation. Given its substantial market influence, Nvidia’s stock significantly impacts Wall Street, and it recorded a weekly decline of 13.9% despite consistently exceeding analysts’ growth expectations.
On the positive side, US Steel experienced a 4.3% increase after the CEO of competitor Cleveland Cliffs expressed interest in acquiring US Steel during an MSNBC interview, even if the White House were to block the proposed sale to Japan’s Nippon Steel.
Additionally, the bond market witnessed sharp swings as well, with Treasury yields fluctuating throughout the day following the release of the jobs report.
The two-year Treasury yield initially dropped to 3.64% following the release of the jobs report, before quickly rebounding above 3.76%. It then fell back to 3.66% after Waller’s comments, down from 3.74% at the close of the previous day.
The S&P 500 declined 1.7% or 94.99 points to close at 5,408.42 marking its worst week since March 2023, while the Nasdaq fell 2.6% or 436.83 points, settling at 16,690.83, led by tech companies like Broadcom and Nvidia.The Dow Jones Industrial Average also shed 410 points (1%) after initially gaining 250 points in the morning, ending at 40,345.41.
However, despite the market’s turbulent week, the S&P 500 remains just 4.6% below its record high set in July and is still up 13.4% for 2024 so far, which is considered a good performance.
The jobs report, considered the most important of the year, showed that US employers hired fewer workers in August than economists had predicted, marking the second consecutive month of lower-than-expected hiring. This data, along with recent reports indicating weakness in manufacturing and other economic sectors, has raised questions about the extent to which the Federal Reserve will cut its main interest rate at its upcoming meeting.
Meanwhile, the report also contained some positive indicators as the unemployment rate decreased from 4.3% to 4.2%, and August’s job growth, although weaker than anticipated, surpassed July’s figures.
The Federal Reserve has been working to curb high inflation by maintaining the federal funds rate at a two-decade high for over a year. However, the central bank is now expected to shift its focus towards protecting the job market and preventing a recession.
While interest rate cuts can boost investment prices, there are concerns on Wall Street that the Fed may be acting too late. If a recession does occur, it would negatively impact corporate profits and negate the benefits of lower rates.
“All is not well with the labor market,” said Brian Jacobsen, chief economist at Annex Wealth Management. “The Fed wanted the labor market to come into better balance, but any balancing act is unstable.”
Federal Reserve board member Christopher Waller highlighted the importance of being data-driven without overreacting to individual data points. He expressed his belief that the economy is not currently in a recession or necessarily heading towards one in the near future. Waller acknowledged the cooling labor market and suggested that a series of rate reductions may be appropriate, given that slowing job growth now appears to be a more significant concern than high inflation. However, he noted that the specific pace and extent of these cuts remain undetermined.
Broadcom declined 10.4% despite surpassing analysts’ expectations for profit and revenue in the recent quarter, partially attributed to AI. The company’s projected revenue of $14 billion for the current quarter fell slightly short of analysts’ forecasts of $14.11 billion, according to FactSet. Consequently, Broadcom’s stock suffered a substantial weekly drop of 15.9%.
Additionally, other chip companies, including Nvidia, also fell on Friday, with Nvidia’s stock falling by 4.1%. Following a surge earlier in the year due to increased revenue driven by the AI frenzy, Nvidia’s stock has been volatile since mid-July as investors reassess its valuation. Given its substantial market influence, Nvidia’s stock significantly impacts Wall Street, and it recorded a weekly decline of 13.9% despite consistently exceeding analysts’ growth expectations.
On the positive side, US Steel experienced a 4.3% increase after the CEO of competitor Cleveland Cliffs expressed interest in acquiring US Steel during an MSNBC interview, even if the White House were to block the proposed sale to Japan’s Nippon Steel.
Additionally, the bond market witnessed sharp swings as well, with Treasury yields fluctuating throughout the day following the release of the jobs report.
The two-year Treasury yield initially dropped to 3.64% following the release of the jobs report, before quickly rebounding above 3.76%. It then fell back to 3.66% after Waller’s comments, down from 3.74% at the close of the previous day.
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