In a notable downturn, US benchmark equity indexes experienced declines during intraday trading after official reports indicated that job growth in the economy fell short of expectations for August. The Nasdaq Composite saw a decrease of 2.1%, settling at 16,767.4, while the S&P 500 lowered by 1.4% to 5,425.9.
The Dow Jones Industrial Average also contributed to the negative trend, declining by 0.7% to 40,456.8. All sectors faced losses, particularly the communication services and technology sectors, which were the most affected. Economic indicators revealed that the total US nonfarm payrolls increased by 142,000, according to the Bureau of Labor Statistics.
This figure was notably below the consensus estimate of a 165,000 increase, based on a survey compiled by Bloomberg. In a related statistic, the unemployment rate dipped to 4.2% from the previous month’s 4.3%, aligning with analysts' expectations for August. "The labor market clearly has moderated over the past year; however, we believe there is insufficient evidence to assert that this recent lag is the onset of a significant deterioration in underlying economic fundamentals," stated TD Economics in a report to clients.
The firm further articulated that, barring any significant changes in economic indicators, they anticipate three quarter-point rate cuts from the Federal Reserve by the end of the year. Market analysts noted that the probability of a 25-basis-point interest rate cut on September 18 surged to 73% on Friday, a significant jump from the prior day's 60%.
Conversely, the likelihood of a more drastic 50-basis-point reduction diminished, decreasing from 40% to 27%, as indicated by data from the CME FedWatch tool. In terms of bond yields, the US two-year yield experienced a decline of 7.9 basis points, landing at 3.67% intraday. Similarly, the 10-year rate fell by 2.5 basis points, reaching 3.71%.
John Williams, President of the New York Fed, suggested that it is now appropriate for the central bank’s Federal Open Market Committee to begin easing its monetary policy. Additionally, Fed Governor Christopher Waller emphasized the importance of initiating the easing phase later this month. Waller mentioned, "It is likely that a series of reductions will be appropriate; however, determining the pace of these rate cuts will pose challenges.
I do not believe the economy is in a recession or necessarily trending towards one in the near future." In the commodities market, West Texas Intermediate crude oil prices fell by 1.8% to $67.90 per barrel. This downward trend is leading towards a projected weekly loss, even amid delays concerning supply increases by the Organization of the Petroleum Exporting Countries and its allies, as noted by D.A.
Davidson. Company-specific news saw Broadcom ($AVGO) suffer a significant downturn, with shares plummeting by 8.9%, marking it as the worst performer on both the S&P 500 and Nasdaq indexes. The chipmaker disclosed a fiscal fourth-quarter revenue outlook that did not meet Wall Street’s expectations despite reporting stronger-than-expected third-quarter results, which were bolstered by the demand for artificial intelligence semiconductor solutions and its acquisition of VMware. Tesla ($TSLA), the electric vehicle manufacturer, experienced the second-largest decline on both indexes, with its stock decreasing by 6.6%.
BRP ($DOOO), known for manufacturing snowmobiles and all-terrain vehicles, slashed its full-year outlook following disappointing fiscal second-quarter results that reflected year-over-year drops due to demand challenges. Shares of BRP fell by 3% intraday. In precious metals trading, gold prices slid 0.7% to $2,524.70 per troy ounce, while silver experienced a notable drop of 3%, trading at $28.23 per ounce..