US stocks experienced a significant turnaround on Friday following the release of a softer-than-expected jobs report, with implications of imminent interest-rate cuts gaining traction among investors. The S&P 500 fell by 0.4%, retreating from its all-time closing high achieved the previous day. Similarly, the Dow Jones Industrial Average and the tech-heavy Nasdaq Composite saw declines of 0.5% and approximately 0.2%, respectively, after earlier gains.
The Bureau of Labor Statistics reported that the US economy created only 22,000 jobs in August, well below economists’ expectations of 75,000. Additionally, the unemployment rate ticked up to 4.3%, compared to 4.2% in the prior month. Revisions to employment data from June and July indicated a slower labor market, with fewer than 30,000 new jobs created over the past three months. This led to a negative print in June, marking the first labor market shrinkage since 2020.
The jobs report is especially notable as it was released shortly after President Trump dismissed the head of the Bureau of Labor Statistics, spurring Wall Street’s growing confidence in an upcoming rate cut at the Federal Reserve’s September meeting. Traders are now pricing in a complete certainty of a rate reduction, with increasing speculation surrounding a more considerable 50-basis-point cut.
In reaction to the jobs data, Treasury yields plummeted, with the 30-year yield plummeting below 4.79% and the benchmark 10-year yield dropping to its lowest level since April, at 4.07%. In a social media post following the report, Trump lashed out at Fed Chair Jerome Powell, reiterating his belief that the Federal Reserve should have taken action on interest rates much earlier.
In contrast to the broader market’s downturn, shares of Broadcom surged more than 10% after the semiconductor company released an optimistic earnings forecast and announced a significant deal with OpenAI to develop custom chips needed for artificial intelligence applications. This announcement injected enthusiasm into the tech sector, alongside a 4.9% rise in Tesla shares after its board proposed a staggering $1 trillion compensation package for CEO Elon Musk, tied to ambitious performance goals.
The gold market also reacted positively, with gold futures soaring to record levels. Prices climbed past $3,650 per ounce, increasing nearly 6% over the last week alone, as traders anticipated a rate cut from the Federal Reserve. Gold has seen a nearly 40% rise year-to-date, driven by concerns over the potential weakening of Fed independence amid political pressures.
Amid the backdrop of a cooling labor market, analysts noted that the situation could have broader implications. The dramatic slowdown reflected by the jobs report could significantly influence investor sentiment and policy formulation at the Federal Reserve.
Stock futures had initially pointed to a positive start, buoyed by anticipated tech gains, particularly from Broadcom and Tesla, before turning south later in the trading day. Broadcom’s market cap surged nearly $140 billion intraday, as investors showed keen interest in the AI boom.
Despite the positive signals from certain sectors, the overall outlook for the job market remains uncertain, indicating a potential shift in investor focus and policy direction in the coming weeks. The employment slowdown underscores the complexity of navigating market reactions, particularly in light of changing conditions and forthcoming Federal Reserve decisions.
