Stock Market Today: Nasdaq Closes in Correction Territory as Recession Fears Bite
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| Reuters |
LANGKATODAY - The Nasdaq slumped Friday, closing in correction territory as a much weaker-than-expected jobs report triggered fears the U.S. economy could be heading for recession and sparked a sharp jump in volatility.
At 16:00 ET (20:00 GMT),the NASDAQ Composite slumped 2.5% and is now in correction territory after closing 10.2% from its July peak of 18,671.07, entering correction territory. The Dow Jones Industrial Average fell 611 points, or 1.5%, the S&P 500 dropped 1.9%.
Weak payrolls triggers hard landing worries
The July official jobs report showed that fewer jobs were created last month than expected, with nonfarm payrolls rising 114,000 last month, the lowest since January 2021, and down from a revised 179,000 in June. Economists had seen the July number at 177,000.
The unemployment rate also rose to 4.3%, up from 4.1% in June, while month-on-month average hourly wage growth came in at 0.2%, a drop from 0.3% the previous month.
"The sharp slowdown in payrolls in July and sharper rise in the unemployment rate makes a September interest rate cut inevitable," said analysts at Capital Economics, "and will increase speculation that the Fed will kick off its loosening cycle with a 50 bp cut or even an intra-meeting move."
The weaker data prompted many on Wall Street to call on the Fed to slash rates by 50 basis point at the September meeting.
JPMorgan joined Citi early on Friday calling for back-to-back 50 basis points cuts in September and November.
"We now think the FOMC cuts by 50bp at both the September and November meetings, followed by 25bp cuts at every meeting thereafterm" JPMorgan said Friday, adding that there was a "strong case" for the Fed to act before the Sept. 18 meeting.
About 80% of traders believe the Fed could cut by 50 bps in September, according to Investing.com's Fed Rate Monitor Tool.
VIX jumps to 15 month highs; Treasury yields flag economic doom worries
Fears about the economy ushered a wave of volatility as the CBOE Volatility Index, or so-called fear index, hit 15 month highs, rising to 24.12, the highest level since March 2023.
"The current flare up has put the VIX back over 20 for the first time since the Fall of last year. Its important to note that over the past decade or so VIX has averaged 19 so even a 20 reading is quite low relative to history – it’s the speed and scale of the algo driven selloffs that create the sense of much higher volatility," Jay Pelosky, TPW Advisory Founder and Principal said Friday.
In a further sign of economic worry, the yield on 10-year Treasuries plunged 185 basis points to 3.79% to the lowest levels since December.
Intel, Amazon disappoint; Apple a bright spot amid sea of red
Tech giants Amazon and Intel fell sharply on weaker quarterly results, adding further pressure on the broader market an offsetting a climb in Apple.
Chipmaker Intel Corporation (NASDAQ:INTC) stock slumped nearly 27% as its June quarter earnings missed estimates. The company also suspended its dividend and said it will cut 15% of its jobs as part of a turnaround plan.
"Even against very low expectations, INTC disappointed as gross margin was surprisingly much worse, capex is being cut (which could call into question its foundry plans) and the dividend is being fully suspended," UBS said as it cut its price target on Intel to $32 from $37 a share.
"We believe investors will likely view the majority of this weakness as INTC-specific as the company’s transformation efforts have yet to yield positive financial returns.
Amazon.com Inc (NASDAQ:AMZN) stock fell 9% after the e-commerce giant provided a softer-than-expected outlook on revenue, and warned that online sales were slowing as consumers grew more cautious over purchases.
"AMZN's Q2 saw a better-than-feared AWS result but was more than offset with misses out of ads, North American margins, a disappointing guide and a raised capex outlookBy contrast, Apple stock traded 3% higher after the company reported stronger-than-expected revenue and profit in the June quarter," RBC said in a note.
Apple Inc (NASDAQ:AAPL) stock traded 2% higher after the company reported stronger-than-expected revenue and profit in the June quarter.
This came on the back of slightly better than expected sales of its flagship iPhone, although device sales did fall from last year amid growing competition in top market China.
Snap Inc (NYSE:SNAP), meanwhile, fell more than 26% after the social media company's softer Q3 guidance rattled investors. The guidance for the current quarter reflects "softness in Brand advertising," Truist Securities said as it cut its price target on Snap to $13 from $16 a share.
(Ambar Warrick and Senad Karaahmetovic contributed to this item.)
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