By Chibuike Ojoh
NEW YORK (Reuters) – U.S. stocks fell on Friday, pressured by a jobs report that showed the labor market remained sluggish but left traders uncertain about how far the Federal Reserve will go in cutting interest rates.
All three major indices fell, with all 11 sectors of the benchmark index losing ground, led by declines in telecom services, technology and consumer discretionary stocks.
U.S. employers added 142,000 jobs in August, less than analysts had expected, while July job growth was revised down to 89,000, also below estimates, Labor Department data showed.
The report means Fed Chairman Jerome Powell should cut interest rates later this month, but it also suggests it may be too late for the economy to achieve a soft landing, said Lou Pasinisi, president and chief market strategist at MDB Capital in New York.
“If we start seeing layoffs in the next month or two, it will signal that his timing was too late,” Basinis said. “Stocks will continue to fall until next week when the Fed makes a definitive decision to cut rates, which could put pressure on the Fed to cut rates by 50 basis points instead of 25 basis points. I think a 25 basis point rate cut is almost guaranteed.”
Federal Reserve Governor Christopher Waller said on Friday that “the time has come” for the U.S. central bank to begin a series of interest rate cuts, adding that he was open about the size and pace of such cuts.
Traders’ bets on a 25 basis point rate cut in September were 73%, according to the CME Group’s (NASDAQ:) FedWatch tool, while bets on a 50 basis point rate cut were 27%, down from a brief spike to 51% after the report.
“I still think the Fed will move 25 basis points,” said Tony Roth, chief investment officer at Wilmington Trust in Radnor, Pennsylvania. “I don’t think the Fed is really ready at this point to hit the panic button.”
According to preliminary data, the Standard & Poor’s 500 lost 93.74 points, or 1.70%, to close at 5,409.67 points, while the Nasdaq Composite lost 436.83 points, or 2.55%, to close at 16,690.83 points. The Dow Jones Industrial Average fell 402.20 points, or 0.99%, to close at 40,353.55 points.
Losses in leading growth stocks have dragged down indices, including the so-called Super Seven: Nvidia (NASDAQ:), Tesla (NASDAQ:), Alphabet (NASDAQ:), Amazon (NASDAQ:), Meta (NASDAQ:), Microsoft (NASDAQ:), and Apple (NASDAQ:).
Broadcom (NASDAQ:B) shares fell after the chipmaker forecast fourth-quarter revenue that fell slightly short of estimates, hurt by slowing spending in its broadband segment.
Shares of other chip companies also fell. Marvell (NASDAQ:) Technology and Advanced Micro Devices (NASDAQ:) ended the day lower.
Shares of Super Micro Computer Inc. (NASDAQ:SMIC) fell. JPMorgan analysts downgraded the AI server maker from “overweight” to “neutral.”