Stocks plunge as concerns grow over weak U.S. jobs

2024-08-02 20:40:53

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Stocks were hit by a global sell-off on Friday as weak U.S. job growth stoked concerns about a sudden downturn in the world’s largest economy.

The tech-heavy Nasdaq fell more than 2.4%., The shares fell as Intel and Amazon reported disappointing results.

Official data showed employers added 114,000 jobs in July, well below expectations, while the unemployment rate rose to its highest level in nearly three years.

The data suggested a long U.S. jobs boom may be coming to an end and fueled speculation about when and how much the Federal Reserve will cut interest rates.

The stock market is already concerned about high borrowing costs and there are signs that a long rally in share prices, driven in part by optimism about artificial intelligence (AI), may be losing steam.

The Nasdaq fell on Friday, down about 10% from its recent high – a decline known as a “correction” – and in this case, it happened in just a few weeks.

The Dow Jones Industrial Average also fell 1.5% on Friday, while the S&P 500 closed down 1.8% as Asian and European stock markets fell.

In Japan, the Nikkei 225 fell nearly 6%.

Earlier this week, the Federal Reserve again kept interest rates unchanged but signaled that a rate cut was likely at its next meeting in September.

“The question now is not whether they will [Federal Reserve] “We don’t know if the Fed will cut rates in September, but by how much,” said Jay Woods, chief global strategist at Freedom Capital Markets.

Seema Shah, chief global strategist at Principal Asset Management, said the latest jobs data raised questions about whether the Fed waited too long.

“Job gains have fallen below 150,000, which is consistent with a solid economy,” she said.

“A September rate cut is a done deal, and the Fed will hope they don’t move too slowly again.”

The U.S. Labor Department’s report on Friday showed the unemployment rate rose to 4.3% – its highest level since 2021 and up from 3.5% a year ago.

Wage growth has also slowed, with average hourly earnings rising just 3.6% over the past 12 months.

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Amazon’s stock fell more than 10% on Friday even though the e-commerce giant reported a 10% increase in sales in its most recent quarter.

The company would be hit hard if the U.S. economy were to suffer, and investors would be skeptical of its massive spending on artificial intelligence.

Intel Corp.’s shares plunged more than 27 percent after the chipmaker warned it would need to take drastic steps to restore growth, including cutting more than 15,000 jobs.

Benchmark crude oil prices can reflect economic growth expectations. It also fell nearly 3%.

The stock market turmoil comes as the U.S. presidential campaign heats up, raising the stakes for the Federal Reserve and exposing its actions to intense political debate.

Republicans say lowering rates would amount to helping Democrats, and their presidential candidate Donald Trump said cutting rates before the election was “something they know they shouldn’t do.”

But Fed officials have long argued that politics doesn’t influence their rate decisions.

President Joe Biden, in a statement following the jobs data, said the economy was still making progress.

U.S. economy The annual growth rate is 2.8% This spring, the market began to rebound after a slump at the beginning of the year.

Analysts said last month’s rise in the unemployment rate also appeared to be due to an increase in the number of people looking for work rather than a sudden surge in the number of unemployed people.

Nancy van den Houten, chief U.S. economist at Oxford Economics, said she thought the report “overstated emerging signs of weakness.”

“We are not ignoring the rising trend in unemployment, but the economy is not in recession,” she said.

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