NEW YORK — Stocks experienced a significant downturn on Friday following a weaker-than-expected July jobs report, which fueled concerns about a potential recession. The broad market index fell 1.84% to close at 5,346.56, while the Nasdaq Composite lost 2.43%, ending at 16,776.16. This drop has pushed the tech-heavy index into correction territory, more than 10% below its recent peak. The Dow Jones Industrial Average declined by 610.71 points, or 1.51%, finishing at 39,737.26, with a session low showing a drop of nearly 1,000 points.
The sell-off was triggered by disappointing employment data. The Labor Department reported that nonfarm payrolls increased by only 114,000 in July, falling short of the 185,000 jobs expected by economists. This was a decrease from the 179,000 jobs added in June. The unemployment rate rose to 4.3%, its highest level since October 2021.
In response to the weak jobs report, investors flocked to bonds, pushing the 10-year Treasury yield to its lowest point since December. The decline in bond yields suggests growing concerns that the Federal Reserve may have erred in its recent decision to maintain current interest rates.
The tech sector, already under pressure, saw significant losses. Amazon’s stock dropped 8.8% after the company missed revenue expectations and issued a cautious forecast for the future. Intel plummeted 26% following disappointing guidance and planned layoffs, while Nvidia fell 1.8% after a 6% drop the previous day.
The Nasdaq is now the first major index to enter correction territory, with the S&P 500 and Dow also showing declines of 5.7% and 3.9% from their all-time highs, respectively.
According to LPL Financial chief technical strategist Adam Turnquist, Friday’s declines reflect a natural adjustment after the Nasdaq’s recent overextension and the excitement surrounding artificial intelligence investments. Despite the current downturn, Turnquist believes this is not the end of the AI narrative.
The broader market sell-off also impacted bank stocks, with Bank of America down 4.9% and Wells Fargo falling 6.4%, as recession fears mounted. The volatility has been pronounced, with the S&P 500 moving more than 1% in each of the past three trading sessions.
The Federal Reserve’s recent hint at a potential rate cut had initially boosted the market, but Friday’s job figures led some investors to question whether the central bank should have acted sooner.
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