Dow opens higher as S&P 500 heads for worst week since April

The selloff showed investors’ initially sanguine interpretation of the August jobs report had already shifted. While they initially expressed relief that the headline number wasn’t worse, this has now been trumped by concerns about downward revisions to the prior two months’ data, said Josh Chastant, portfolio manager at Guidestone Capital Management, during an interview with MarketWatch.

“The expectation is maybe we’ll get another revision to the August numbers when we get the next report,” Chastant said.

While technology and semiconductor stocks were leading the market lower, selling was notable broad-based. All 11 S&P 500 sectors were lower on Friday, according to FactSet data.

Here is where stocks were trading recently:

The S&P 500 was down 3.6% this week, on track for its worst weekly drop since March 10, 2023, when it fell 4.6%, according to Dow Jones Market Data. The Dow was down 2.4%, on track for its worst drop since March 10, when it fell 4.4%. On that day, SVB was closed by state regulators as depositors rushed to pull their money.

A short-lived post-open bump for U.S. stocks had already faded by mid-morning on Friday.

The Dow had turned lower in recent trade, while the S&P 500 and Nasdaq Composite added to their early losses. Both indexes were headed for their worst week since April, according to Dow Jones Market Data. The S&P 500 was on track for a fourth daily drop, its longest stretch of daily declines since April 19, Dow Jones data showed.

Here is where stocks stood in recent trade:

The losses followed an August jobs report that, despite missing economists’ expectations for the headline number, was deemed not quite as dire as some had expected.

Eric Freedman, chief investment officer at US Bank, told MarketWatch earlier that the data had surpassed a “whisper number” that had been floating around Wall Street.

As stocks declined, Treasury yields were erasing a post-data bump. Moves in both markets suggested investors’ concerns about the state of the U.S. consumer, and by extension, the economy, remained front-and-center.

The Nasdaq Composite was lagging on Friday, and once again, a handful of megacap tech and semiconductor stocks were to blame.

The tech-heavy index, which tracks all stocks listed on the Nasdaq stock exchange, was down 150 points, or 0.9%, at 16,998 in recent trade, according to FactSet data.

Shares of five companies drove the bulk of the index’s drop. Two were major semiconductor names: Broadcom Inc., which was headed for its biggest percentage-point drop since March 2020 and Nvidia Corp., which has fallen nearly 20% so far this week, FactSet data showed.

The other three were Amazon.com Inc., which was down 1.2%, Tesla Inc., which was down 2.5%, and Alphabet Inc.’s Class A and Class C shares, which were down 1.7% and 1.6%, respectively.

Friday’s employment report on U.S. jobs growth in August was “near perfect,” according to Ameriprise chief economist Russell Price.

“Job growth was good, but not too good as to keep the Fed on hold at their current fed funds interest rate target, and not too soft as to raise fears of a collapsing labor market,” Price said in emailed comments Friday. He expects the Federal Reserve may this month cut its benchmark interest rate by a half percentage point, from its current target range of 5.25% to 5.5%.

“For the first time in more than three years, we’re able to say that the job market is clearly cooling,” he said. “Today’s payroll number for August was a fair +142,000 but too many jobs are still being generated in the government sector and prior month revisions were revised materially lower.”

The Dow Jones Industrial Average was up 0.3%, while the S&P 500 shed 0.3% and the Nasdaq Composite fell 0.8%, according to FactSet data, at last check. Meanwhile, the yield on the 10-year Treasury note was up about two basis points at around 3.74%, after initially falling after the U.S. jobs report was released earlier Friday morning.

Broadcom shares are under heavy pressure Friday after the company came up short with its revenue forecast for the ongoing quarter.

The stock is down 9.6% in morning trading and on pace for its worst single-day performance since it dropped 15.9% on March 18, 2020, according to Dow Jones Market Data.

Still, analysts were upbeat. Broadcom’s “AI story still looks really good to us, with clear evidence of high demand and outlook for ‘strong’ growth next year,” Bernstein’s Stacy Rasgon said in a note to clients. And the company seems “to be killing it on VMware, which markedly exceeded expectations in the quarter and which seems poised to continue growing.”

U.S. stocks were mostly higher in early trade after Friday’s August labor-market report showed fewer jobs were added than anticipated, but the unemployment rate ticked lower.

It isn’t time to panic, according to Preston Caldwell, chief U.S. economist at Morningstar, who expects the Federal Reserve to lower its policy rate “in every meeting,” as long as economic data continues to follow the recent trajectory.

He also doesn’t think the data calls for “a 50 basis-point per meeting rate cut,” given that economic activity remains strong. “It’s highly implausible that the labor market is going to spontaneously collapse and bring down the economy with it,” he wrote, in emailed comments.

Furthermore, falling bond yields in anticipation of rate cuts “will soon start to stimulate the economy, which front loads the impact of monetary loosening and reduces the Fed’s need to hurry.”

U.S. stocks opened higher on Friday as investors appeared to take comfort in the fact that the August jobs report released earlier wasn’t quite as dire as some had expected.

As a result, stocks had shrugged off their premarket weakness after the open. But the S&P 500 remained on track for its worst week since April, FactSet data showed.

Here is where stocks stood shortly after the open:

Friday’s jobs report certainly wasn’t ideal, but the takeaway from investors was that it could have been worse.

“The soft August payroll report does not scream recession, but it does underline that the balance of risks to a soft landing scenario are to the downside,” said David Donabedian, chief investment officer of CIBC Private Wealth U.S.

The latest data, coupled with reports released earlier this weak, clearly show the labor market has weakened, Donabedian said, in emailed comments. But investors are still trying to ascertain whether the soft landing scenario is really at risk.

As a result, whether the Fed cuts rates by 50 basis points or 25 later this month remains a “coin flip.”

“The equity market is still trying to figure out how much slowing is going on in the economy. Is it a gentle flow or is stagnation a possibility. Today’s report does not settle that question. It is a coin flip what the Fed will do and futures are evenly split on the 25/50 question for this month. If the Fed lowers rates by 50 bp, the risk is that it looks like the Fed is panicking and that the recession risk is higher than generally believed.”

Financial markets have turned their attention to how much the Federal Reserve will ease its monetary policy and how fast the U.S. economy is slowing, as investors assess the latest U.S. jobs report, according to Wells Fargo’s Scott Wren.

The “Fed has wanted a weaker labor market but only to a certain extent and the data is now testing Chair Powell’s stated limits,” said Wren, senior global market strategist at Wells Fargo Investment Institute, in emailed comments Friday. The “labor market is decelerating, and we continue to look for the unemployment rate to rise to 4.4% by the end of this year.”

Wren said that he is expecting the Fed will begin lowering its policy interest rate this month, by a quarter percentage point, and has penciled in a full percentage point of rate cuts by the end of 2024.

The Friday jobs report didn’t deliver the decisive data point necessary to settle the debate between whether the Federal Reserve will deliver a rate cut of 25 or 50 basis points later this month.

“We think the Fed should cut 50 out the gates with this data, but the Committee is inertial and [Fed Chair Jerome] Powell may not have enough here to deliver 50, and may have to settle for a dovish 25 – presented as the start of a string of 25s at every meeting into Q1 with an avowed readiness to step up to 50 at any point including November if downside risks to employment mount,” said Krishna Guha, head of the global policy and central bank strategy team at Evercore ISI, in a note.