Wall Street dives on jobs data, ASX set to tumble
While refusing to claim victory on either the jobs or the inflation fronts on Wednesday, before the discouraging economic reports hit, Powell said Fed officials “have a lot of room to respond if we were to see weakness” in the job market after hiking its main rate so high.
“Certainly today’s job data feeds the weakening economy narrative, but I believe the market is overreacting at this point and pricing too much in on rate cuts at this stage,” said Nate Thooft, senior portfolio manager at Manulife Investment Management. “Yes, the economy is weakening, but I am not convinced there is enough evidence that the data so far is a death knell for the economy.”
US stocks had already appeared to be headed for losses Friday before the disappointing jobs report thudded onto Wall Street.
Several big technology companies turned in underwhelming profit reports, which continued a mostly dispiriting run that began last week with results from Tesla and Alphabet.
Amazon fell 8.8 per cent after reporting weaker revenue for the latest quarter than expected. The retail and tech giant also gave a forecast for operating profit for the summer that fell short of analysts’ expectations.
Intel dropped even more, 26.1 per cent, for its worst day in 50 years, after the chip company’s profit for the latest quarter fell well short of forecasts. It also suspended its dividend payment and forecast a loss for the third quarter, when analysts were expecting a profit.
Apple held steadier, up 0.7 per cent, after reporting better profit and revenue than expected.
Fed chair Jerome Powell. There are fears that the US central bank may have waited too long to cut interest rates.Credit: AP
Apple and a handful of other Big Tech stocks known as the “Magnificent Seven” were the main reasons the S&P 500 set dozens of records this year, in part on a frenzy around artificial-intelligence technology. But their momentum turned last month on worries investors had taken their prices too high.
Friday’s losses for tech stocks dragged the Nasdaq composite 10 per cent below its record set last month. That level of drop is what traders call a “correction.”
Helpfully for Wall Street, other areas of the stock market beaten down by high interest rates began rebounding sharply last month when tech stocks were regressing, particularly smaller companies. But they tumbled too Friday on worries that a fragile economy could undercut their profits.
The Russell 2000 index of smaller stocks dropped 3.5 per cent, more than the rest of the market.
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All told, the S&P 500 fell 100.12 points to 5,346.56. The Dow dropped 610.71 to 39.737.26, and the Nasdaq composite fell 417.98 to 16,776.16.
In the bond market, Treasury yields fell sharply as traders forecasted deeper cuts to rates coming from the Federal Reserve. The yield on the 10-year Treasury fell to 3.79 per cent from 3.98 per cent late Thursday and from 4.70 per cent in April.
In stock markets abroad, Japan’s Nikkei 225 dropped 5.8 per cent. It’s been struggling since the Bank of Japan raised its benchmark interest rate on Wednesday. The hike pushed up the value of the Japanese yen against the US dollar, which could hurt profits for exporters and deflate a boom in tourism.
Chinese stocks fell as investors registered disappointment with the government’s latest efforts to spur growth through various piecemeal measures, instead of hoped-for infusions of broader stimulus, while stock indexes dropped by more than 1 per cent across much of Europe.
Commodity prices also had a rough ride this week. Oil prices leaped after the killings of leaders of Hamas and Hezbollah fuelled fears that a widening conflict in the Middle East could disrupt the flow of crude.
But prices fell back Thursday and Friday on worries that a weakening economy would burn less fuel. A barrel of benchmark US crude dropped back below $US74 after coming into the week above $US77.
AP
