Wall Street today: Wall Street losses deepened on Friday, August 2, with a sharp drop in US equities and US Treasury yields at multi-month lows after a weak jobs report fueled worries the US Federal Reserve has been too slow to cut key the interest rates, risking a more pronounced US economic slowdown.
Downbeat forecasts from Amazon and Intel hit the pricey Big Tech valuations—richly valued technology firms—exacerbating a selloff that brought the tech-heavy Nasdaq Composite index into correction territory. The cooler-than-expected jobs data stoked fears among traders that the US could be heading towards recession.
An index or stock is considered to be in a correction when it closes 10 per cent or more below its previous record closing high. The S&P 500 was down 2.5 per cent in midday trading, on pace for its worst day since 2022 and its first back-to-back loss of over one per cent since April. The Nasdaq slumped over 10 per cent from its July peak as a sell-off for stocks whipped worldwide back to Wall Street.
A report showing hiring by US employers slowed last month by much more than economists expected sent fear through markets. It followed a batch of weaker-than-expected reports on the economy from a day earlier, including a worsening in US manufacturing activity, which has been one of the areas hurt most by high rates.
According to the jobs data, 114,000 US jobs were added in July, well below estimates, and the unemployment rate unexpectedly climbed for a fourth month to 4.3 per cent, renewing concerns that the economy is slowing. This follows Thursday's data showing that US manufacturing activity shrank by the most in July in eight months.
Earlier this week, US Federal Reserve officials signalled that they are on course to cut rates in September, and the readings prompted traders to ramp up policy-easing bets. The S&P 500 hit its lowest level since June 5, and the index, along with the blue-chip Dow, is on track for its biggest two-day slides in nearly two years.
MSCI's global stock gauge MSCI's gauge of stocks across the globe fell 2.26 per cent to 785.26. The Dow Jones Industrial Average fell 569.93 points, or 1.41 per cent, to 39,778.04, the S&P 500 lost 119.44 points, or 2.19 per cent, to 5,327.24 and the Nasdaq Composite lost 560.79 points, or 3.26 per cent, to 16,633.36.
According to a Reuters analysis of LSEG data, over the last 44 years, the index has slipped into correction territory after hitting a new high 24 times, or about once every two years. The Nasdaq is still up 12 per cent year-to-date. The S&P 500 has lost about six per cent from its high and is also up 12 per cent this year.
The Nasdaq's tumble comes as investors turn more wary of the highly valued tech stocks that have led the charge higher for most of the year, driven by excitement over the potential of artificial intelligence (AI).
Lacklustre results from Tesla and Alphabet last month compounded worries about stretched valuations. At the same time, there may be concern that weaker-than-expected results reflect a broader softness in the economy.
Treasury yields fell sharply in the bond market as traders raised their expectations for how deeply the US Federal Reserve would have to cut interest rates. The yield on the 10-year Treasury fell to 3.81 per cent from 3.98 per cent late Thursday and from 4.70 per cent in April.
Amazon.com fell nine per cent on slow online sales growth in the second quarter as cautious consumers sought cheaper purchase options. Intel crashed 27 per cent after forecasting third-quarter revenue below estimates and suspending its dividend starting in the fourth quarter. Intel also announced it would cut more than 15 per cent of its workforce while reporting a $1.6 billion quarterly loss.
Other chip stocks were also set to extend Thursday's losses. Nvidia and Broadcom lost two per cent each, while Micron Technology and Arm Holdings were down around seven per cent each. The Philadelphia SE Semiconductor Index hit a three-month low, set for its biggest two-day slide since March 2020.
Bucking the negative trend in megacaps, Apple rose 2.3 per cent after posting better-than-expected third-quarter iPhone sales and forecasting more gains, betting on AI to attract buyers. Chevron Corp fell 3.5 per cent after the oil giant missed estimates for second-quarter profit.
Major US banks also fell for the second straight day on recession concerns, with the S&P 500 Financials and Banks indexes losing three per cent and 4.7 per cent, respectively. Among other movers, Snap declined 24.7 per cent after forecasting current-quarter results below expectations.
The small-cap Russell 2000 index slumped four per cent to hit a nearly one-month low and was set for its biggest two-day slide since June 2022. Wall Street's "fear gauge", or VIX index, breached the long-term average of 20 points to hit its highest mark since last March.
European stocks extended their slide after the jobs data exacerbated a rout in tech shares. The Stoxx 600 Index ended the session 2.7 per cent lower, the most in over a year. Investors took shelter in defensive stocks, with utilities and some pharmaceuticals, including AstraZeneca Plc and Sanofi SA, outperforming.
Emerging market stocks fell 23.92 points, or 2.20 per cent, to 1,063.88. MSCI's broadest index of Asia-Pacific shares outside Japan closed 2.27 per cent lower, at 554.93. In Asia, where markets closed before the US jobs data, Tokyo led losses. Nikkei 225 tanked 5.8 per cent—its biggest drop since the start of the pandemic four years ago—owing to a stronger yen, which hit Japan's key export sector.
The Bank of Japan (BoJ)'s decision to hike interest rates for the second time in 17 years—and talk of another to come—strengthened the yen to its best level since March. Hong Kong and Sydney were off more than two per cent, Seoul gave up more than three per cent, and Taipei shed more than four per cent, with losses also in Shanghai, Mumbai, and Singapore.
Gold prices hit their highest in over two weeks on Friday as Treasury yields, and the US dollar declined after data showed the U.S. economy created fewer jobs than expected in July. The data boosted hopes of the Federal Reserve's rate cuts this year.
Spot gold was up over one per cent at $2,472.59 per ounce, just $11 shy of the record peak of $2,483.60 scaled on July 17. US gold futures climbed 1.4 per cent to $2,516.50. Gold has gained 3.2 per cent so far this week, on track for its best week since April, as rising safe-haven demand from Middle East tensions and expectations of rate cuts made the metal more appealing for investors.
Crude oil prices fell by more than $2 on Friday, on track for their fourth straight weekly decline after US jobs data dampened sentiments and a weak Chinese economic further pressured investor sentiment. Brent crude futures declined $2.65, or 3.33 per cent, to $76.87 a barrel. US West Texas Intermediate crude futures were down $2.90, or 3.8 per cent, at $73.41. US crude futures fell by over $3 per barrel during the session.
