The Nasdaq Composite
On Friday, major stock indexes ended a challenging week with a sharp decline, driven by a weak jobs report and ongoing concerns about the tech sector. The S&P 500 fell 1.7%, extending its weekly losses to over 4%, marking its worst week since March 2023. The Nasdaq Composite, heavily influenced by technology stocks, dropped 2.5%, culminating in a 5.8% decline for the week. The Dow Jones Industrial Average also experienced a significant drop, falling by 401 points or 1%, and struggling to recover from a morning gain of 250 points.
The U.S. job market data for August showed a slower pace of hiring than anticipated. Nonfarm payrolls increased by 142,000, falling short of economists’ expectations of 164,000. This figure marked an improvement from July’s heavily revised number of 89,000. The unemployment rate edged down to 4.2% from 4.3% in July, aligning with forecasts. Average hourly earnings rose by 0.4%, reversing the previous month’s contraction. The weaker-than-expected jobs report fueled concerns about the economy and left investors questioning the Federal Reserve’s next moves.
Federal Reserve Governor Christopher Waller indicated support for rate cuts in light of the recent data, although he emphasized that the extent and timing of such cuts would depend on further economic conditions. This dovish stance comes as the market grapples with uncertainty over the Fed’s policy direction. Initially, futures traders had anticipated a significant 50 basis-point rate cut, but expectations shifted as the day progressed. The yield on the 10-year Treasury bond fell to 3.71%, its lowest level in over a year, before recovering slightly. The two-year Treasury yield also saw volatility, reflecting market uncertainty about the Fed’s policy stance.
In the tech sector, which has been a major driver of market performance in recent years, shares of Nvidia and Tesla were hit hard. Nvidia’s stock dropped 4.6% on Friday, continuing its decline from the previous week, and is now down 13.9% over the past week. Tesla experienced a sharp decline of more than 7%, breaking below its 50-day moving average and adding to its recent volatility. Both companies had been significant beneficiaries of the AI boom, but recent market concerns about overvaluation and slowing growth have impacted their stock prices.
Broadcom, a major player in the semiconductor industry, also faced considerable losses, with shares tumbling by 10% after its quarterly sales outlook fell short of investor expectations. Despite reporting strong performance in AI segments and raising its full-year revenue outlook for AI-related products to $12 billion, the company’s forecast for the upcoming quarter was below estimates. This underwhelming outlook, coupled with broader concerns about the tech sector’s valuation, contributed to a broader decline in chip stocks, including AMD, Marvell Technology, and Micron Technology.
UiPath saw its shares fall 6% despite reporting better-than-expected quarterly results and raising its annual guidance. The company’s performance was overshadowed by broader market concerns and skepticism about its future stability. Analysts believe that the stock may remain range-bound until there are clearer signs of consistent execution and growth.
Nasdaq and NYSE
In the broader market, the Russell 2000, which tracks small-cap stocks, dropped 1.6% on Friday and 5.7% for the week, reflecting a general pullback across various sectors. Volume was higher on both the Nasdaq and NYSE, indicating increased selling pressure. The bond market also experienced volatility, with Treasury yields initially dropping and then recovering, contributing to a steepening of the yield curve.
Overall, the week’s trading was characterized by heightened volatility and broad-based declines across major indexes. Investors are grappling with economic uncertainties, the potential impact of Federal Reserve policy changes, and concerns about the sustainability of recent gains in technology stocks. The S&P 500, Dow Jones, and Nasdaq all closed lower, with small-cap stocks also facing losses, highlighting a widespread retreat in equities.
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