U.S. Stock Market Plummets Amid Disappointing Jobs Report

By Karen Friar and Hamza Shaban
Updated: August 3, 2024

The U.S. stock market experienced a significant downturn on Friday, as the July jobs report revealed unexpected weakness in the labor market, contributing to heightened concerns about a potential recession. This news sent the Nasdaq Composite into correction territory, defined as a decline of more than 10% from its most recent peak.

Market Reaction to Jobs Data

The tech-heavy Nasdaq Composite dropped 2.6% following the release of the disappointing employment figures. As a result, it fell over 10% from its high recorded on July 10, signaling a correction. Simultaneously, the Dow Jones Industrial Average plummeted by 1.5%, equating to a decrease of more than 600 points, while the S&P 500 dropped by 1.8%. All three major indices reported weekly losses, with the S&P and Dow each down 2% and the Nasdaq declining around 3%. The Russell 2000 index fared even worse, witnessing a weekly loss of approximately 6.8%.

Labor Market Concerns

The latest employment data, published by the Bureau of Labor Statistics, indicated that the U.S. economy added fewer jobs than anticipated in July, and the unemployment rate unexpectedly climbed to 4.3%. These figures have raised alarm bells among investors, as they hint at a slowing economy that could lead to the Federal Reserve maintaining its "higher for longer" interest-rate policy, potentially pushing the economy into recession.

In the wake of this jobs report, traders have begun to factor in expectations for three rate cuts later this year, with speculation about a substantial 50 basis-point cut in September. Responding to these economic indicators, the yield on the benchmark 10-year Treasury fell, trading around 3.79%, dipping further below the 4% threshold.

Individual Stock Performance

The downturn was mirrored in individual stock performances, particularly among technology companies. Chipmaker Intel faced heavy losses following a disappointing earnings report and a grim sales forecast. The company announced job cuts and a dividend suspension, leading to a staggering 26% fall in its shares, which negatively impacted other stocks in the semiconductor sector.

Amazon also faced pressure, with its stock declining nearly 9% due to sales guidance that missed Wall Street estimates. However, not all tech stocks suffered; Apple reported better-than-expected earnings, resulting in a modest share price increase of less than 1% despite a drop in iPhone sales.

Looking Ahead

As August trading begins, investors are left grappling with the implications of a cooling labor market and the potential for significant monetary policy shifts from the Federal Reserve. Following a week marked by volatility, analysts and traders alike will be closely monitoring economic trends and upcoming corporate earnings reports to assess whether the tech sector can recover from its current correction phase.

Market participants will also be awaiting further economic data and clearer signals from the Fed regarding its future monetary policy, with the first full week of August expected to bring renewed focus on the health of the economy as inflation concerns continue to shape financial market dynamics.

With uncertainties looming, traders are anticipated to remain cautious, especially as more companies prepare to disclose their earnings in the weeks ahead.