In a notable dip on Friday, U.S. equity indexes experienced a decline following a midday slump triggered by weaker-than-expected data on nonfarm payrolls. This disappointing employment report coincided with downward revisions of employment numbers for the previous two months, resulting in a decrease in government bond yields.
The Nasdaq Composite dropped significantly, falling 2.5% to close at 16,702.4. The S&P 500 index also faced a setback, sliding 1.7% to 5,412.9, while the Dow Jones Industrial Average endured a 0.9% decline, settling at 40,379.9. Every sector within the market faced a downturn, with technology, communication services, and consumer discretionary leading the losses.
According to the Bureau of Labor Statistics, nonfarm payrolls increased by only 142,000 in August, which was considerably lower than the consensus forecast of a 165,000 increase drawn from a Bloomberg survey. Moreover, the employment figures for July underwent a downward revision, revealing only an 89,000 increase, while June's payrolls were also revised down to show a gain of 118,000.
This resulted in a cumulative downward revision total of 86,000 jobs lost. Despite this less than encouraging employment report, the unemployment rate exhibited a slight decline from July's 4.3% to 4.2% in August, aligning with expectations. In a speech delivered at the University of Notre Dame, Federal Reserve Governor Christopher Waller emphasized that decisions regarding the pacing of interest rate reductions will depend on future data regarding labor market conditions.
"Determining the pace of rate cuts and ultimately the total reduction in the policy rate are decisions that lie in the future," Waller stated, indicating a preference for initiating the rate-cutting process in the upcoming Federal Open Market Committee (FOMC) meeting. He added that if subsequent economic data reveals significant labor market deterioration, the FOMC is prepared to act swiftly to adjust monetary policy as necessary.
The anticipated next policy decision from the FOMC is set for September 18. On a related note, the CBOE's Volatility Index (VIX)—often referred to as the 'fear index'—rose sharply by more than 18%, closing at 23.52, reflecting increased market anxiety. In terms of Treasury yields, most fell, with the 10-year yield dipping by less than one basis point to 3.73%, and the two-year yield decreasing by 5.8 basis points to settle at 3.69%.
In energy markets, West Texas Intermediate crude oil prices dropped 2.3%, resting at $67.53 per barrel. Focusing on corporate news, shares of Broadcom ($AVGO) saw a dramatic decline, plummeting 9% intraday, making it the worst performer in both the S&P 500 and Nasdaq indexes. This downturn followed the company's late Thursday announcement of a projected fiscal Q4 revenue around $14 billion, just shy of analysts' expectations of $14.04 billion as reported by Capital IQ.
JPMorgan also made headlines by downgrading Super Micro Computer ($SMCI) from an overweight rating to neutral. Consequently, shares of Super Micro fell 6.2% intraday, marking the second most substantial decline among the indices. In another significant development, reports surfaced indicating that Intel ($INTC) is contemplating the sale of its 88% stake in the automated driving systems provider Mobileye Global ($MBLY).
Following this news, shares of Intel experienced a drop of 2.5% intraday, placing it among the largest laggards on the Dow. In commodities, gold prices fell by 1.1%, closing at $2,516.10 an ounce, while silver prices suffered a more considerable decline, plunging 3.6% to $28.05. To summarize the relevant tickers, the mentioned stocks include $US30, $US500, $AVGO, $SMCI, $INTC, and $MBLY, which are pivotal to understanding the current market landscape..