Swedish Consulate – U.S. stocks fell for the second consecutive session on Friday Aug 2. The Nasdaq Composite officially entering correction territory after following a disappointing jobs report that heightened recession fears in short terms.
The Labor Department reported a rise of only 114,000 nonfarm jobs last month, falling short of the 175,000 anticipated by economists surveyed by Reuters. Below the 200,000 needed to match population growth. Additionally, the unemployment rate climbed to 4.3%, nearing a three-year high.
This data intensified concerns that the economy is slowing more rapidly than expected. The Federal Reserve might have made a mistake by keeping interest rates unchanged during its recent policy meeting that concluded on Wednesday.
The likelihood of a 50 basis point rate cut at the Fed’s September meeting surged to 69.5% from 22% in the previous session, according to CME’s FedWatch Tool.
“The jobs report is clearly the main story, but it seems we’ve entered a phase where bad economic news is interpreted as negative rather than being seen as positive,” commented Lamar Villere, portfolio manager at Villere & Co. in New Orleans.
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“The Fed is expected to cut rates during Surge Amid, and that seems to be the consensus. The real question now is whether they delayed too long and whether we might be facing a recession.”
The weak employment data also triggered what is known as the “Sahm Rule”. Historical indicator often seen as a reliable signal of an impending recession.
The Dow Jones Industrial Average fell by 610.71 points, or 1.51%, to 39,737.26. The S&P 500 dropped 100.12 points, or 1.84%, to 5,346.56. While the Nasdaq Composite declined by 417.98 points, or 2.43%, to 16,776.16.
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