US Stocks Tumble After Jobs Report Signals Fed Rate Cut Uncertainty
US stocks ended the week in deep losses on Friday as investors processed the latest jobs report, which provided insight into the upcoming interest rate decision by the Fed. The report showed a weaker-than-expected increase in jobs, prompting speculation over the size of the Fed’s potential rate cut this month.
Tech Stocks Lead Market Declines
Tech stocks bore the brunt of the decline, with the Nasdaq Composite (^IXIC) plunging more than 2.5%. The S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) also posted significant losses, dropping around 1.7% and 1%, respectively. This marked the worst week for the Nasdaq since June 2022, and the S&P’s steepest weekly drop since March 2023.
Jobs Data Misses Expectations
The US economy added 142,000 jobs in August, falling short of expectations for 165,000. Additionally, job growth for the prior month was revised lower, signaling further signs of a cooling labor market. However, the unemployment rate ticked back down to 4.2%, providing some hope for resilience.
The jobs report has shifted expectations for the Federal Reserve’s upcoming policy meeting, where traders are anticipating a possible rate cut. According to the CME FedWatch tool, there is now a 50-50 chance of a 50-basis-point cut, up significantly from earlier in the week.
Fed Signals More Rate Cuts – Impact on US Stocks
On Friday, Federal Reserve Governor Chris Waller reiterated the Fed’s readiness to lower interest rates. In prepared remarks delivered at the University of Notre Dame, Waller stated, “If the data supports cuts at consecutive meetings, then I believe it will be appropriate to cut at consecutive meetings.” This echoed Fed Chair Jerome Powell’s recent comments about the time being right for rate cuts.
Despite this, US stocks remained volatile throughout the week, as investors weighed incoming economic data against the potential actions of the Fed. With all three major indexes poised for weekly declines, market sentiment remained cautious.
Broadcom and Nvidia Drag Chip Stocks Lower
In corporate news, Broadcom (AVGO) shares fell more than 10% after the company issued a lackluster sales forecast. While Broadcom has benefited from a surge in artificial intelligence (AI) spending, its other divisions have lagged.
This dragged down other semiconductor stocks, including Nvidia (NVDA), which saw its shares fall by about 4%.
The weak performance in tech, particularly in chip stocks, added to broader market declines, further weighing on investor sentiment.
As the market closes out a turbulent week, investors grapple with uncertainty over the size and timing of the next Fed rate cut. The weak jobs report, combined with mixed corporate earnings, has fueled volatility, particularly in the tech sector. All eyes will be on the Fed’s upcoming meeting as traders look for more clarity on the future of interest rates and economic growth.
Chart by Trading View
