As if the stock market needed more reasons to be jittery, it faced another significant sell-off on Friday, marking the second consecutive day of sharp declines. With the Nasdaq officially slipping into correction territory, the financial landscape is increasingly looking grim.
The Dow Jones Industrial Average bore the brunt of the market turmoil, plummeting nearly 1,000 points during the morning session before partially recovering to a loss of 610 points, or 1.5%, closing at 39,737.26. Thursday wasn’t much better, with the Dow dropping nearly 500 points. The S&P 500 followed suit, dropping 1.8%, while the Nasdaq suffered a steeper slide of 2.4%. All three major indexes ended the week with losses exceeding 2%.
The catalyst for this turmoil was a disappointing jobs report from the Labor Department. The report revealed a meager increase of 114,000 nonfarm payrolls last month, falling far short of the 175,000 predicted by economists and even further from the 200,000 needed to keep pace with population growth. The unemployment rate jumped to 4.3%, nearing a three-year high.
This sobering data has intensified concerns that the economy is decelerating faster than anticipated. Analysts are questioning whether the Federal Reserve’s decision to hold rates steady at their recent policy meeting was a critical misstep. Consequently, the likelihood of a 50 basis point rate cut at the Fed’s September meeting has surged to 69.5%, a dramatic rise from the 22% forecast just a day earlier, according to CME’s FedWatch Tool.
“Clearly, the jobs number is the headline issue,” said Lamar Villere, portfolio manager at Villere & Co. in New Orleans. “But we’re now living in a reality where bad economic news is recognized as such, rather than being misinterpreted as a positive. The big question now is whether the Fed delayed too long and if we are indeed on the brink of a recession.”
Adding to the market’s woes, the weak jobs report triggered the “Sahm Rule,” a well-regarded recession indicator known for its historical accuracy. The rule’s activation suggests that the likelihood of an imminent recession is higher than previously thought.
The market downturn was further exacerbated by severe drops in major tech stocks. Amazon saw its shares plummet nearly 9%, while Intel’s stock plunged 26% following disappointing quarterly results and forecasts. These declines helped push the Nasdaq Composite down more than 10% from its July peak, officially confirming it is in correction territory. The S&P 500 also hit its lowest point since June 5, and both the S&P index and the Dow experienced their largest two-day losses in almost two years.
Small-cap stocks fared poorly as well, with the Russell 2000 index falling to a nearly one-month low, suffering its biggest two-day drop since June 2022. The Philadelphia SE Semiconductor Index hit a three-month low after experiencing its most significant two-day slide since March 2020.
In a rare bit of good news, Apple saw a modest rise of about 1% after reporting better-than-expected third-quarter iPhone sales and projecting future gains, with an optimistic outlook on AI to drive further growth.
Among the sectors, only consumer staples saw gains, while the Consumer Discretionary sector, heavily influenced by Amazon’s poor performance, was the worst hit, on track for its most significant two-day drop since June 2022.
The VIX, Wall Street’s “fear gauge,” soared to 29.66, its highest level since March 2023, breaching the long-term average of 20 points. Despite the widespread panic, some market participants view the sell-off as an opportunity to buy stocks at discounted prices. UBS strategist Jonathan Golub suggested in a note to clients that market returns are often greatest when the VIX is high, potentially signaling a near-term buying opportunity.
In other news, Snap’s stock crashed about 25% after the company forecasted disappointing current-quarter results. The market’s ongoing volatility underscores the growing uncertainty and challenges facing investors as the global economic outlook remains precarious.
