The US benchmark equity indexes experienced declines on Friday, impacted significantly by a wave of post-earnings sell-offs from tech giants Intel and Amazon.com. Investors are currently digesting the latest jobs report which has further implications for monetary policy. According to the Bureau of Labor Statistics, the US economy saw an addition of 114,000 jobs last month.
This number fell short of expectations, as the consensus projection was for a gain of 175,000 jobs, highlighting the uncertainty in the current economic climate. The unemployment rate has also ticked up to 4.3% from 4.1% in June, aligning with market expectations for July. This jobs report has prompted finance experts, such as those from BMO, to suggest that the Federal Reserve now has the necessary indicators to begin rate cuts as early as September.
The attention of market participants is expected to shift towards the scale and depth of these upcoming rate adjustments. Traders are currently factoring in a nearly 68% chance of a significant 50-basis-point rate cut next month, a notable increase from just 22% reported on Thursday. The sentiment comes on the heels of the Federal Open Market Committee's decision to maintain the benchmark lending rate at a range of 5.25% to 5.50%, marking the eighth consecutive pause.
In commodity markets, September West Texas Intermediate crude oil closed down $2.79, settling at $73.52 per barrel, while October Brent crude—an international benchmark—was last down $2.66 to $76.86. These movements reflect growing concerns regarding decreasing demand from major importers and a general shift toward risk aversion in the wake of softening stock markets.
In the realm of technology stocks, Apple's shares saw a modest rise of 1.1%, buoyed by fiscal Q3 results that surpassed expectations. The company's strong performance in iPad and Mac sales managed to compensate for a dip in iPhone revenue. Conversely, Intel faced a significant setback as its shares plummeted nearly 27%.
The chipmaker's Q2 financial results fell short of analysts' projections, which led to the announcement of a $10 billion cost-cutting initiative. This plan includes a reduction of its workforce by more than 15% and the suspension of dividends starting in Q4, raising concerns about its long-term competitiveness.
With significant developments in both the labor market and corporate earnings, investors remain vigilant as these factors are likely to influence market dynamics and monetary policy in the upcoming weeks..