By Chuck Mikolajczak
NEW YORK (Reuters) – U.S. stocks fell for a second straight session on Friday, confirming a slide into correction territory after a weak jobs report raised concerns about an impending recession.
Nonfarm payrolls increased by 114,000 jobs last month, the Labor Department said, well below the 175,000 jobs economists had forecast in a Reuters poll and the minimum 200,000 jobs economists believe are needed to keep pace with population growth. The unemployment rate rose to 4.3 percent, near a three-year high.
The data added to concerns that the economy is slowing faster than expected and that the Federal Reserve erred when it kept interest rates steady at its monetary policy meeting that concluded on Wednesday.
Expectations for a 50 basis point rate cut at the Fed’s September meeting rose to 69.5% from 22% in the previous session, according to CME’s FedWatch tool.
“Obviously the jobs number is the headline, but it seems like we’ve at least officially entered a rational world where bad economic news is read as bad rather than bad economic news being read as good,” said Lamar Fillier, portfolio manager at Fillier & Co. in New Orleans.
“The Fed is going to cut rates, and we’ve all adapted to that, and that’s normal. Now it’s like, ‘Did they wait too long? Are we heading into a recession?’”
Weak jobs data has also triggered what is known as the “share rule,” which many see as an accurate historical indicator of a recession.
The Nasdaq Composite Index fell 910.06 points, or 2.26 percent, to 39,437.91, and lost 130.49 points, or 2.40 percent, to 5,316.19. The Nasdaq Composite Index lost 481.00 points, or 2.80 percent, to 16,713.15.
Adding to the downward pressure was a 10% drop in Amazon (NASDAQ:) and a more than 25% drop in Intel (NASDAQ:) after their disappointing quarterly results and outlook.
The declines pushed the Nasdaq Composite down more than 10% from its July closing high, putting it on track to confirm it is in a correction after growing concerns about expensive valuations amid a weak economy.
The S&P 500 hit its lowest level since June 5. Both the benchmark and the Dow Jones Industrial Average were on track for their biggest two-day declines in nearly two years.
The small-cap index fell about 4% to its lowest level in nearly a month and was on track for its biggest two-day decline since June 2022.
Chip stocks also continued their recent slide, with the Philadelphia SE Semiconductor Index hitting a three-month low and on track for its biggest two-day drop since March 2020.
Among the few bright spots, Apple (NASDAQ:) stock rose about 2% after it posted better-than-expected third-quarter iPhone sales and forecast further gains, betting that artificial intelligence will lure buyers.
Of the 11 major sectors in the S&P 500, only consumer staples were higher, with consumer discretionary leading the declines as Amazon stock weighed heavily, on track for its biggest two-day drop since June 2022.
Wall Street’s “fear gauge” broke through its long-term 20-point average to touch 29.66, its highest level since March 2023.
Among other decliners, Snap Inc. fell about 25% after the company reported lower-than-expected results for the current quarter.
Declining issues outnumbered advancing issues by a ratio of 3.5 to 1 on the NYSE and 4.954 to 1 on the Nasdaq.
The S&P 500 recorded 58 new 52-week highs and 15 new lows, while the Nasdaq Composite recorded 32 new highs and 268 new lows.