S&P 500, Dow, Nasdaq post biggest weekly decline in years after weak jobs report
US stocks closed lower on Friday, with all three major indexes posting their biggest weekly decline in years. Following the weak jobs report, investors continued to question how much the Federal Reserve will cut interest rates in the coming weeks.
This week, the S&P 500 fell 4.25% and the Dow fell 2.93%. Both were their biggest weekly declines since March 2023. The Nasdaq fell 5.77% this week, their biggest weekly decline since January 2022.
US employment increased by 142,000 in August, below Bloomberg consensus estimates of 163,000. July was revised down to 89,000, also below expectations. The unemployment rate fell to 4.2% from 4.3% in July.
Slowing job growth confirms the economy is weakening, and the Fed is almost certain to cut rates at the end of its Sept. 18 policy meeting. But Lou Basenise, president and chief market strategist at MDB Capital in New York, said the Fed’s cuts also suggest they may be coming too late for the economy to achieve a soft landing.
“If we start to see layoffs in the next month or two, that will mean the timing is too late,” he said.
The bond market is expecting a cut, with two-year Treasury yields dropping to their lowest since 2022.
How big will the Fed cut be?
Fed Governor Christopher Waller said Friday that “the time has come” for the U.S. central bank to begin a series of rate cuts, adding that he is open-minded about the size and pace of any cuts.
CME’s Fed Watch tool calculates the likelihood of a quarter-point rate cut at the Fed’s next meeting, while the chances of a half-point cut were 29%.
The Fed raised its key interest rate to near zero to a 23-year high of 5.25% to 5.5% in 2022 and 2023 to fight inflation, and has kept it there since.
Corporate news also weighed on stocks
Semiconductor maker Broadcom Inc. fell 10% to $137.00 after it forecast fourth-quarter revenue to be slightly below expectations on weaker spending in its broadband division.
Supermicrocomputer Inc. fell 6.87% to $386.46 after a JPMorgan analyst downgraded shares of the AI ​​server maker to neutral from overweight.
