US Stock Market as Tech Sector Leads Losses Amid Weak Jobs Report

The US stock market closed in negative territory on Friday, wrapping up a turbulent week as investors reacted to a key jobs report that hinted at a potential interest rate cut later this month. All three major indexes ended in the red, with technology stocks leading the losses.

Nasdaq Suffers Worst Week Since 2022

The Nasdaq Composite (^IXIC) plunged over 2.5% on Friday, making it the worst-performing index of the day. The S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) also saw significant declines, dropping about 1.7% and 1%, respectively. For the Nasdaq, this marked its worst weekly performance since June 2022, while the S&P 500 endured its toughest week since March 2023.

Jobs Data Misses Expectations, Unemployment Rate Falls

The catalyst for the sell-off was a mixed jobs report for August, which revealed that the US economy added 142,000 jobs, missing economists’ expectations of 165,000 jobs. The previous month’s job growth was also revised downward, indicating a continued cooling in the labor market. Despite the lower job numbers, the unemployment rate ticked down to 4.2%, a positive signal for the economy.

The Federal Reserve has closely monitored job growth and other economic indicators in recent months to gauge the timing and size of its next interest rate move. Friday’s report shifted market sentiment, raising expectations for a larger rate cut. According to the CME FedWatch tool, traders now see a 50% chance of a 50 basis point cut at the Fed’s upcoming meeting, a significant jump from the prior day’s forecast.

Fed Governor Hints at Rate Cuts in Back-to-Back Meetings

On Friday, Federal Reserve Governor Chris Waller echoed comments made by Fed Chair Jerome Powell earlier in the week, suggesting that “the time has come” for the central bank to lower rates. Speaking at the University of Notre Dame, Waller emphasized that if economic data continues to support rate cuts, consecutive meetings could see additional cuts.

“If the data supports cuts at consecutive meetings, then I believe it will be appropriate to cut at consecutive meetings,” Waller said, solidifying expectations for a more dovish Fed stance.

Tech Stocks Take a Hit, Broadcom Leads Decline

In corporate news, tech stocks bore the brunt of the sell-off. Broadcom (AVGO), a major chipmaker and supplier to Apple, saw its shares plummet more than 10% after issuing a disappointing sales forecast. Despite benefiting from a surge in AI spending, Broadcom’s other business divisions underperformed, leading to investor concerns.

This weakness in Broadcom reverberated across the tech sector, with shares of Nvidia (NVDA), a key player in the AI space, dropping by around 4%. The tech-heavy Nasdaq felt the impact of this sector-wide sell-off, dragging down the broader market.

Outlook: Interest Rate Cut on the Horizon?

As investors digest the latest economic data and corporate earnings, the focus will remain on the Fed’s next moves. With mounting pressure from weaker jobs data and cooling market sentiment, the possibility of a rate cut looms large, but uncertainty remains.

In the weeks ahead, investors will closely watch for any further signals from the Federal Reserve on how it plans to tackle both inflation and economic slowdown. For now, the market continues to ride the waves of volatility, as traders brace for more turbulence in the weeks leading up to the next Fed decision.

FAQ