Wall Street faced a substantial downturn Friday as the Dow Jones Industrial Average plunged by 610 points, roughly 1.5%, amid growing recession fears following a lackluster jobs report for July.
The S&P 500 and Nasdaq Composite also recorded significant declines of 1.8% and 2.4%, respectively, reflecting widespread investor anxiety.
According to CNBC, the U.S. Labor Department's report revealed that nonfarm payrolls grew by just 114,000 in July, falling well short of the 185,000 predicted by economists. This marks a steep drop from June's 179,000 jobs, raising concerns about economic health. The unemployment rate climbed to 4.3%, the highest since October 2021, indicating potential trouble ahead for the labor market.
The tech-focused Nasdaq was hit particularly hard, slipping into correction territory, now down over 10% from its recent peak. The Nasdaq-100, which includes the largest companies in the Composite, experienced an even sharper decline, trading 11% below its 52-week high. Currently, the S&P 500 and Dow are 6% and 4% off their record highs, respectively.
The downturn was exacerbated by poor earnings reports from several major companies. Amazon's shares tumbled 12.5% after missing revenue expectations in its second-quarter results and issuing a pessimistic forecast. This drop significantly impacted the consumer discretionary sector, marking its worst performance since May 2022. Intel's stock also suffered, plummeting 29% following weak guidance and the announcement of significant layoffs. Nvidia saw a decline of more than 5.5%, extending its losses from the previous day.
As market turmoil persisted, investors turned to bonds, driving the 10-year Treasury yield to its lowest level since December, settling at 3.82% amid economic uncertainty.
The BBC reports that the market's volatility followed a week of mixed fortunes. Earlier, markets had rallied on hopes of a Federal Reserve rate cut in September. However, the weak jobs data has cast doubt on whether the central bank should have acted sooner.
The CBOE Volatility Index, known as Wall Street's "fear gauge," surged to 29.66, its highest level since March 2023, reflecting heightened investor anxiety.
In the oil market, U.S. crude prices fell more than 3%, hitting their lowest point since early June as recession concerns overshadowed geopolitical tensions in the Middle East. The West Texas Intermediate contract for September delivery dropped to $73.82 per barrel, while Brent crude settled at $77.22 per barrel.
Despite the overall market decline, Bitcoin remained relatively stable, trading slightly higher at $63,703.02. This stability contrasts with declines in other cryptocurrencies and related stocks such as Coinbase and MicroStrategy, which fell by 4% and 2%, respectively.
Looking forward, investors are closely monitoring the Federal Reserve's next move. Interest rate futures now indicate a growing expectation of a half-point rate cut in September, with the Chicago Mercantile Exchange's FedWatch tool showing a 61.5% probability of such a cut.
President Joe Biden emphasized the ongoing economic progress, noting a 2.8% annual growth rate in the second quarter. However, the rise in unemployment and slowing job creation present challenges as the administration navigates these turbulent economic waters.
