On Friday, US benchmark equity indexes experienced significant declines, with the Nasdaq Composite entering correction territory, as Treasury yields plummeted following the release of the latest jobs report, which fueled worries about a potential recession. The tech-heavy Nasdaq saw a sharp decrease of 2.4%, closing at 16,776.2 and registering a drop of over 10% from its peak in July.
Similarly, the S&P 500 fell 1.8% to 5,346.6, with the Dow Jones Industrial Average also dropping 1.5% to settle at 39,737.3. Among various sectors, consumer discretionary faced the steepest decline, declining by 4.6%, while consumer staples emerged as the leading gainers. Over the week, the Nasdaq tumbled 3.4%, as both the Dow and the S&P 500 recorded losses of 2.1%.
In tandem with these market movements, the US two-year Treasury yield sank 28.1 basis points to 3.88% on Friday, while the 10-year yield slipped by 17.8 basis points to 3.8%. Concerning economic developments, the US economy reportedly added 114,000 jobs in the previous month, according to data released by the Bureau of Labor Statistics.
This figure fell short of the consensus forecast made by Bloomberg, which anticipated a gain of 175,000 jobs. Additionally, the unemployment rate edged up to 4.3%, compared to June's figure of 4.1%, which was already expected by the market for July. This jobs report has been interpreted as a signal for the Federal Reserve, providing 'the green light to start cutting interest rates this September', as noted by BMO in a communication to its clients.
Market attention is anticipated to shift towards the magnitude and depth of forthcoming rate cuts, given that the current market is pricing in a significant dependency on signs of an economic downturn before which the Fed would be compelled to meet cut expectations. Recently, the CME FedWatch tool indicated a nearly 72% likelihood for a more substantial 50-basis-point cut in rates next month, a substantial increase from Thursday's estimate of 22%.
According to Jefferies, 'the market is pricing in a path of rate cuts that the Fed will only meet if there is evidence that the economy is falling into a recession. Right now, there is no evidence to support that.' In company-specific news, shares of Intel ($INTC) experienced a dramatic plunge of 26%, marking it as the worst performer across all three indexes.
This decrease followed the chipmaker's less-than-expected second-quarter financial results released late Thursday. The company announced a massive $10 billion cost-cutting initiative, which will involve a reduction of over 15% in its workforce and a halt on dividend payments starting in the fourth quarter.
Amazon.com ($AMZN) was also among the laggards on the indexes, marking an 8.8% decline after reporting a second-quarter revenue that was lower than analyst expectations. Conversely, Apple ($AAPL) managed to post a slight increase of 0.7% on Friday, following the release of better-than-anticipated results for its fiscal third quarter.
This positive outcome was driven by an increase in iPad and Mac sales that offset declines in iPhone product sales. In the commodities market, West Texas Intermediate crude oil saw a decrease of 2.9%, closing at $74.13 per barrel. Meanwhile, precious metals had mixed results, as gold gained 0.1% to $2,482.70 per troy ounce, while silver rose 0.6% to $28.64 per ounce..