4:12pm: Volatile week
The Nasdaq and the S&P 500 both booked their worst week of the year amid a tech stock selloff and as Friday’s jobs report raised concerns about the health of the US economy.
The Nasdaq closed down 2.5% at 16,690 points on Friday, marking its worst week since June 2022, and the S&P 500 shed 1.7% at 5,408 points, its worst week since March 2023. The Dow Jones lost 1% at 40,345 points.
2:50pm: A market rethink?
The NASDAQ 100 is experiencing its worst week since November 2022, while the S&P 500 has lost $2.2 trillion in market cap during the first week of September.
A disappointing jobs report, combined with downward revisions, triggered algorithmic trading that pushed Treasury yields lower.
This economic weakness suggests that the Federal Reserve might take more aggressive action at its September 18 meeting. As a result, equity futures dropped, and the CME FedWatch tool showed a growing likelihood of a 50-basis-point rate cut, surpassing the expectation for a 25-basis-point cut.
"Markets have had to grapple with - just as the Fed is doing - whether the August payroll data reflects a labor market normalizing towards pre-Covid levels or whether it's indicative of an economy losing dangerous momentum," commented Quincy Krosby, Chief Global Strategist for LPL Financial.
"The lower unemployment number versus the downward revisions presents a quandary given the pattern of downward revisions indicating more serious economic conditions becoming entrenched."
The CME FedWatch probability has recalibrated noticeably for September 18, indicating a 61% chance for a 25 basis points cut rather than 50 basis points, Krosby noted.
12:10pm: Weekly losses in sight
Concerns about the strength of the US economy after new labor data was released on Friday saw stocks slump at midday.
The Nasdaq was down 2.5% at 16,700 points, the S&P 500 was down 1.6% at 5,413 points, and the Dow Jones fell 0.9% at 40,383 points.
Comerica Bank chief economist Bill Adams said signals economic growth is slowing, as demonstrated in Friday’s jobs data, will prompt the Fed to cut rates faster than they had signalled earlier this year.
“The Fed will see the August jobs report as strengthening the case for less restrictive monetary policy,” Adams said.
“Comerica forecasts for the Fed to cut short-term interest rates a full percentage point by the end of January. That will help credit-intensive parts of the economy like housing, manufacturing, and business investment accelerate, and help job growth stabilize.”
Jeffrey Roach, LPL financial chief economist, still sees the Fed cutting rates by 25 basis points and reserving the right to be more aggressive in the last two meetings of the year.
11:15am: Return to bear trend
The three major stock indexes were firmly in negative territory mid-morning on Friday after new data showed the US economy added fewer jobs than expected in August.
After an initial bounce, stock indexes resumed this week’s bear trend, IG senior technical analyst Axel Rudolph observed.
“This data initially propped up US indices with rate cut expectations between 25 and 50 basis points at the Fed's 18 September meeting at first being finely balanced,” Rudolph said.
“Within a couple of hours of the non-farm payrolls release, the probability of a 50bps rate cut slid to 43%, though, together with stock indices which had a dismal week.”
9.53am: Wall Street mixed but calm start after jobs figures
Wall Street faced a mixed but calm start on Friday after non-farm payroll figures missed expectations again but unemployment ticked down slightly.
The Dow Jones climbed 0.4% as the market opened, while the Nasdaq fell 0.7% and S&P 500 dipped 0.1%.
Though the non-farm payroll figures were again worse than expected, at 142,000 against an anticipated 160,000, a 0.1% drop in unemployment in August appeared to ease fears over a US recession.
This comes after last month’s global market turmoil, which had been sparked by July’s poorer-than-expected job market data.
Wall Street appeared to hike expectations for a 50 basis point cut to base interest this month on the back of the figures.
According to CME Group’s FedWatch Tool, expectations for the steeper cut climbed to 51% after the figures, against 41% beforehand.
8.48am: US economy adds fewer jobs than expected again
Bureau for Labour Statistics data on Friday showed the US economy added fewer jobs than expected once again in August.
Some 142,000 jobs were added to the economy over the month, the non-farm payroll figures showed, against 114,000 in July and below expectations for 160,000.
Unemployment ticked down 0.1% to 4.2% over the month, but climbed against the 3.8% recorded a year earlier.
This appeared to calm nerves that the US economy was on course for recession with US market futures little changed after the news, remaining just below the mark as seen before the data’s release.
Omnis Investment chief executive Andrew Summers noted the latest miss was “not a total surprise given the summer months tend to be more volatile and changeable”.
“Our base case remains a 25 basis point cut from the Federal Open Market Committee at the next meeting,” he added.
7.27am: Markets brace for jobs data
Wall Street looked to be headed for a negative start on Friday as investors braced for non-farm payroll data, due later in the day.
Futures had the Nasdaq down 1.1% ahead of the bell, with the S&P 500 and Dow Jones also looking to drop 0.6% and 0.4% respectively.
Last month’s non-farm payroll figures had sent global markets into freefall, leaving eyes firmly fixed on Friday’s latest data and any signs the US could in fact be heading for recession.
“Labour data, and primarily US Non-Farm Payrolls, offer up some of the clearest guidance over the underlying strength [of the] economy,” Trade Nation analyst David Morrison commented.
Fears are of another sell-off after Friday’s figures, he added, with last month’s coming on concerns the Federal Reserve had choked the economy by failing to bring interest rates down in time.
Expectations are for the US economy to have added 160,000 jobs over the course of August, against 114,000 in July.