Wall Street Falls Amid Uncertainty Over Job Market/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ Wall Street retreated Friday after weak U.S. job growth data raised concerns that the labor market may be cooling too rapidly. Investors are now fully expecting a Fed rate cut, but questions remain about whether it’s coming too late. Major indexes dipped as bond yields fell and tech stocks wavered.
Wall Street Reaction to Job Data: Quick Looks
- S&P 500 drops 0.6%, Dow falls 334 points.
- August jobs report shows hiring slower than expected.
- Market bets on 100% chance of Fed rate cut Sept. 17.
- Treasury yields tumble as recession fears rise.
- Broadcom up 9.1% after strong AI chip earnings.
- Tesla gains 2.2% on $1T Musk payout plan.
- Lululemon plummets 17.3% on weak U.S. sales.
- Nvidia falls 4% amid AI valuation concerns.
- International markets mixed; Japan and China post gains.
Deep Look: US Stocks Fall as Wall Street Weighs Slowing Job Market and Rate Cut Risks
NEW YORK — U.S. stock markets stumbled on Friday as investors digested another weaker-than-expected jobs report, raising fears that the labor market may be slowing too quickly and putting the Federal Reserve in a tough position ahead of its next interest rate decision.
After a brief early rally, the S&P 500 reversed course, falling 0.6% and pulling back from Thursday’s all-time high. The Dow Jones Industrial Average lost 334 points, or 0.7%, after climbing 148 points earlier. The Nasdaq composite dropped 0.5%, reflecting nervousness in the tech sector.
Jobs Report Sparks Worry
The August employment report from the U.S. Labor Department revealed that American employers added significantly fewer jobs than economists predicted. Additionally, the government revised down its estimates for June and July by a combined 21,000 jobs, adding to concerns about labor market momentum.
This follows a string of disappointing labor and economic updates, and traders are now fully pricing in a 100% probability that the Federal Reserve will cut interest rates at its next meeting on September 17, according to CME Group’s FedWatch Tool.
“This week has been a story of a slowing labor market, and today’s data was the exclamation point,” said Ellen Zentner, Chief Economist at Morgan Stanley Wealth Management.
Recession Fears Linger
Although the labor market slowdown has raised hopes for a rate cut, it also stirs fears that the economy could be headed for a recession. Investors are left wondering whether the slowdown is just enough to cool inflation or a sign of deeper trouble.
“The numbers might be weak enough to push the Fed toward a rate cut — maybe even a deeper one — but not so weak that we’re in full-blown panic mode,” said Brian Jacobsen, Chief Economist at Annex Wealth Management.
The Federal Reserve, until now, has hesitated to cut rates due to concerns that President Trump’s tariffs might reignite inflation. But the latest jobs data may shift that focus.
Bond Market Reacts Swiftly
The bond market saw dramatic moves, reflecting shifting expectations:
- The 10-year Treasury yield fell to 4.07% from 4.17% on Thursday and 4.28% on Tuesday.
- The 2-year yield, which closely tracks Fed policy expectations, dropped to 3.47% from 3.59%.
These are notable shifts and signal growing belief that interest rate relief is imminent.
Tech and Corporate Movers
Several individual companies made headlines with sharp stock movements:
- Broadcom jumped 9.1% after reporting stronger-than-expected earnings. CEO Hock Tan said demand for AI chips remains robust, with AI-related revenue expected to reach $5.2 billion next quarter.
- Tesla rose 2.2% after unveiling a proposed $1 trillion performance-based compensation plan for CEO Elon Musk, dependent on meeting long-term corporate goals.
- Smith & Wesson Brands surged 8.3% despite a quarterly loss. The company cited healthy demand for new firearm models.
- Lululemon tumbled 17.3% after missing revenue expectations, particularly in its U.S. operations, though international sales showed promise. CFO Meghan Frank blamed industry-wide challenges, including rising tariffs.
- Nvidia, long viewed as the face of the AI stock surge, fell 4%, with analysts questioning whether its valuation had climbed too far, too fast.
Global Markets Mixed
Outside the U.S., markets were mixed as the job data rippled globally:
- European indexes lost early gains and turned lower in tandem with Wall Street.
- In Asia, however, markets closed higher:
- Japan’s Nikkei 225 climbed 1% after data showed faster wage growth.
- Hong Kong’s Hang Seng rose 1.4%, while the Shanghai Composite gained 1.2%, rebounding after several down sessions.
What’s Next for Wall Street?
With stocks having recently hit record levels, investors are now anxiously watching for confirmation that the economy is on a “Goldilocks” path — not too hot to force more rate hikes, and not too cold to spark a downturn.
Markets are priced for perfection, and any surprise from the Fed or upcoming data releases could lead to volatility. The next major inflection point will likely be Fed Chair Jerome Powell’s announcement on September 17, which could chart the course for the rest of the year.
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