Dow Plunges 600 Points, Nasdaq Enters Correction After Weak Jobs Report
03.08.2024: Stocks took a sharp dive on Friday following the release of a much weaker-than-expected jobs report for July, raising concerns about a potential recession. The broad market index fell by 1.84% to close at 5,346.56, while the Nasdaq Composite dropped 2.43% to 16,776.16, marking a more than 10% decline from its recent all-time high. The Dow Jones Industrial Average also suffered, falling 610.71 points, or 1.51%, to 39,737.26. At its lowest point during the session, the 30-stock index was down 989 points.
The downturn in stocks was triggered by the disappointing job growth figures for July. The U.S. Labor Department reported that nonfarm payrolls grew by just 114,000, a significant drop from the 179,000 jobs added in June and well below the 185,000 expected by economists. Additionally, the unemployment rate rose to 4.3%, the highest since October 2021.
Investors flocked to the safety of bonds, causing the 10-year Treasury yield to hit its lowest level since December. This move reflects fears that the Federal Reserve might have erred by keeping interest rates unchanged this week.
Several megacap stocks experienced substantial losses. Amazon’s disappointing second-quarter results and revenue forecast led to an 8.8% drop in its stock price. Intel’s announcement of weak guidance and layoffs resulted in a 26% plunge. Nvidia also fell by 1.8%, following a 6% loss the previous day.
The Nasdaq has officially entered correction territory, down over 10% from its record high. The S&P 500 and Dow are also below their all-time highs, by 5.7% and 3.9% respectively.
Adam Turnquist, chief technical strategist at LPL Financial, described Friday’s declines as a “natural course” in a bull market that’s adjusting after a steep uptrend. He noted that the Nasdaq and semiconductor stocks were highly overbought entering July, and the enthusiasm around AI investments hadn’t yet faced a reality check. However, Turnquist emphasized that this is not the end of the AI story.
The sell-off extended beyond technology stocks. Bank stocks were hit hard due to recession fears, with Bank of America down 4.9% and Wells Fargo falling 6.4%.
This week has been notably volatile, with the S&P 500 moving more than 1% in each of the past three trading sessions. The stock market initially rallied on Wednesday when the Federal Reserve hinted at a possible rate cut in September. However, the weak job figures released on Friday have led many investors to believe that the central bank should have acted sooner.