US Stocks Plunge Amid Economic Concerns Following Disappointing Jobs Report
Investing.com -- In a sharp downturn, US stocks plummeted on Friday due to renewed concerns about the economy after fresh data showed that the US created fewer jobs than expected last month.
Major Indices Take a Hit
By 12:56 ET (1656 GMT), the Dow Jones Industrial Average fell 426 points, or 1%, the S&P 500 dropped 1.8%, and the tech-heavy Nasdaq Composite slumped 2.6%.
Nonfarm Payrolls Miss Expectations
According to the latest Labor Department data, the US economy added 142,000 jobs in August, falling short of economists' predictions of 164,000. This was up from a sharply revised figure of 89,000 jobs in July, initially reported as 114,000. The unemployment rate remained steady at 4.2%, matching expectations and slightly lower than July's 4.3%.
On a positive note, average hourly earnings saw a 0.4% increase on a monthly basis after a 0.1% contraction in July.
Jefferies commented, "This softness in the labor market is enough to give the Fed cover to ease up on monetary policy, but we do not currently see signs of recession that would necessitate a significant number of cuts," reiterating its call for the Fed to cut rates by 25 basis points later this month.
Yield Curve Steepens
Meanwhile, the rate-sensitive 2-year Treasury yield sold off, and the 10-year counterpart retraced earlier losses, leading to a steepening of the yield curve, which turned positive again. Generally, yields move inversely to prices.
Broadcom's Sales Outlook Disappoints Investors
Shares in Broadcom (NASDAQ:AVGO) plummeted over 9% in early US trading after the company's current-quarter sales guidance fell slightly short of investors' expectations. By 10:52 ET (14:52 GMT), shares had dropped 10%.
The company forecasted $14 billion in revenue for its fourth quarter, just under the $14.04 billion estimates, according to LSEG data cited by Multibagger. This was seen as a potential sign of sluggishness in Broadcom's non-AI-related operations. However, the AI segments remained strong, with the firm raising its full-year sales outlook for AI parts and custom chips to $12 billion, up from previous forecasts of more than $11 billion.
Other semiconductor stocks, including Nvidia (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD), also declined following Broadcom's report. Marvell Technology (NASDAQ:MRVL) and Micron Technology (NASDAQ:MU) were lower ahead of the opening bell.
UiPath Inc (NYSE:PATH) fell 6% despite raising its annual guidance and reporting Q2 results that beat Wall Street estimates.
Final Analysis
To break it down simply: The US stock market took a significant hit because the economy added fewer jobs than expected. This has investors worried about the overall health of the economy and the Federal Reserve's next moves regarding interest rates. While some sectors like AI remain strong, others, especially in the semiconductor industry, are showing signs of weakness. This impacts your investments as market volatility could affect your portfolio's value, making it crucial to stay informed and possibly adjust your investment strategies accordingly.