U.S. Stocks Drop Amid Labor Market Slowdown, Rate Cut Uncertainty

U.S. stocks fell sharply on Friday as a disappointing jobs report added to concerns over the Federal Reserve's interest rate cuts. The S&P 500, Dow, and Nasdaq all posted significant weekly declines. Analysts are divided on the extent of the Fed's upcoming rate cuts, raising market uncertainty.

U.S. stocks experienced a significant drop on Friday, influenced by a jobs report indicating a sustained labor market slowdown. This has left traders in a state of uncertainty regarding the Federal Reserve's plans for cutting interest rates.

All three major indexes tumbled, with the S&P 500 and the Dow poised for their biggest weekly drops since March 2023, and the Nasdaq on track for its steepest decline since January 2022. According to data from the U.S. Labor Department, employers added only 142,000 jobs in August, falling short of expectations, while July's job growth was revised down to 89,000.

Lou Basenese, president and chief market strategist at MDB Capital, commented that the Federal Reserve chair Jerome Powell's decision to cut rates might be too late to ensure a soft landing for the economy. Stocks could continue to fall until the Fed makes a definitive rate cut decision, possibly opting for a 50 basis point reduction instead of the anticipated 25 bps.

Fed Governor Christopher Waller suggested that the U.S. central bank should commence a series of interest rate cuts, though he remains open about the size and pace. Market speculation indicates a strong probability of a 25-basis point cut, yet a 50-bps reduction remains a consideration.

The Dow Jones Industrial Average dropped 423.37 points, closing at 40,331.80, while the S&P 500 lost 98.88 points, ending at 5,404.53, and the Nasdaq Composite fell by 449.24 points, settling at 16,678.25. Major growth stocks like Nvidia, Tesla, Alphabet, and Amazon also saw significant declines.

Particularly hard-hit were semiconductor stocks, with Broadcom sinking 9.7%, Marvell Technology dropping 5.8%, and Advanced Micro Devices shedding 4.5%. The Philadelphia SE Semiconductor Index fell by 4.8%, marking its largest weekly drop since March 2020.

(With inputs from agencies.)