Disappointing Jobs Data Leads To Sell-Off On Wall Street

With traders reacting negatively the monthly jobs report, stocks moved sharply lower during trading on Friday. The major averages all showed significant moves to the downside on the day, with the tech-heavy Nasdaq tumbling to its lowest closing level in almost a month.

The major averages finished the day near their lows of the session. The Nasdaq plummeted 436.83 points or 2.6 percent to 16,690.83, the S&P 500 plunged 94.99 points or 1.7 percent to 5,408.42 and the Dow slumped 410.34 points or 1.0 percent to 40,345.41.

For the holiday-shortened week, the Nasdaq saw a 5.8 percent nosedive, the S&P 500 plummeted by 4.3 percent and the Dow tumbled by 2.9 percent.

The sell-off on Wall Street came amid concerns about the outlook for the U.S. economy after the Labor Department released a closely watched report showing employment rose by less than expected in the month of August.

The Labor Department said non-farm payroll employment climbed by 142,000 jobs in August compared to economist estimates for an increase of 160,000 jobs.

The report also said the increases in employment in June in July were downwardly revised to 118,000 jobs and 89,000 jobs, respectively, reflecting a net downward revision of 86,000 jobs.

Meanwhile, the Labor Department said the unemployment rate edged down to 4.2 percent in August from 4.3 percent in July.

The modest decrease, which was in line with estimates, came after the unemployment rate reached its highest level since October 2021.

While the data is seen as increasing the chances of a 50 basis point interest rate cut by the Federal Reserve later this month, traders seemed worried the central bank may have waited too long to prevent the economy from slipping into a recession.

“The large downward revision to payroll gains in the prior two months and the continued narrow concentration in payroll advances underscore that the labor market is losing steam rather quickly,” said Nationwide Chief Economist Kathy Bostjancic.

Sector News

Semiconductor stocks turned in some of the market’s worst performances on the day, with the Philadelphia Semiconductor Index plunging by 4.5 percent to its lowest closing level in a month.

Broadcom (AVGO) helped lead the sector lower, plummeting by 10.4 percent after reporting better than expected fiscal third quarter results but providing disappointing revenue guidance for the current quarter.

Significant weakness was also visible among gold stocks, which moved lower along with the price of the precious metal, dragging the NYSE Arca Gold Bugs Index down by 2.7 percent.

Banking stocks also saw considerable weakness on the day, resulting in a 2.6 percent slump by the KBW Bank Index.

Oil service, computer hardware and networking stocks also showed notable moves to the downside, moving lower along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Friday. Japan’s Nikkei 225 Index declined 0.7 percent, while China’s Shanghai Composite Index fell by 0.8 percent.

The major European markets have also moved to the downside on the day. While the German DAX Index tumbled by 1.5 percent, the French CAC 40 Index slumped by 1.1 percent and the U.K.’s FTSE 100 Index slid by 0.7 percent.

In the bond market, treasuries fluctuated over the course of the session before closing modestly lower. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, dipped 2.1 basis points to 3.710 percent, its lowest closing level in over a year.

Looking Ahead

Next week’s trading is likely to be driven by reaction to closely watched reports on consumer and producer price inflation in the month of August.