Stocks Suffer Worst Weekly Drop Since March 2023 After August Jobs Data

US stocks experienced a steep decline on Friday following a disappointing August jobs report that sparked renewed concerns about a potential recession. The S&P 500 index capped off its most challenging week since March 2023, recording a setback of roughly 4%, while the Nasdaq 100 fell nearly 6% during the same period.

The report revealed that the US economy added just 142,000 jobs in August, significantly lower than the projected 164,000 anticipated by economists. Despite the addition of jobs, the unemployment rate edged down slightly to 4.2% from 4.3%.

Although the August report was less alarming than July’s data, when the unemployment rate unexpectedly surged, it confirmed a slowdown in the labor market. This situation reinforces the sentiment that the Federal Reserve needs to consider cutting interest rates at its policy meeting scheduled for September 18.

In a speech delivered on Friday, New York Federal Reserve President John Williams endorsed the idea of reducing rates, stating, “It is now appropriate to dial down the degree of restrictiveness in the stance of policy by reducing the target range for the federal funds rate.”

The financial markets appear to anticipate a 25 basis point cut from the Fed in the upcoming meeting, as indicated by the CME FedWatch Tool. Earlier in the day, speculation had oscillated between a 25 and a 50 basis point cut.

The latest jobs report paints a clear picture of a deteriorating job market, as evidenced by the declining three-month moving average of job gains, which has fallen from nearly 270,000 in March to just over 110,000 in August.

Investment bank JPMorgan noted following the report that the data underscores a “waning vigor” in the labor market, suggesting it may warrant a more substantial cut of 50 basis points by the Fed at its forthcoming meeting.

Despite the recent weakness in stock prices, some analysts believe this decline fits within typical patterns. Fundstrat’s Tom Lee indicated that such a downturn is consistent with the historically weak performance of the market in September. Lee expressed that although caution may be warranted in the coming weeks, he sees an opportunity for growth in the stock market.

“Even if we are cautious about the next eight weeks, to us, stocks are at the lower end of the range, and we see more upside than downside,” he stated in a note to clients on Friday.

Furthermore, analysts at Ned Davis Research echoed this sentiment, asserting that the September sell-off should be viewed as a buying opportunity as the market gears up for what is historically one of its strongest three-month periods.

As the week concluded, the following figures highlighted the financial landscape for US indexes:

US markets closed with notable changes:

In the commodities and crypto sectors:

• West Texas Intermediate crude oil saw a decrease of 1.55%, closing at $68.08 a barrel, while Brent crude, the international benchmark, dropped 1.83% to $71.36 a barrel.
• Gold prices dipped by 0.82%, settling at $2,522.20 an ounce.
• The yield on the 10-year Treasury bond dipped by one basis point, registering at 3.719%.
• Bitcoin’s value fell by 4.48%, bringing it down to $53,651.

The current market dynamics reflect growing anxieties around the economic landscape as indicators point toward a cooling labor market, leaving investors on edge about future Federal Reserve strategies.

Source: Business Insider