S&P 500 experiences its worst week of losses since March 2023

At midday, the S&P 500 was down by 1.6%, set for its worst week since March 2023. The Dow Jones Industrial Average dropped by 367 points, or 0.9%, by 11:55 a.m. Eastern time, after initially gaining 250 points. The Nasdaq composite fell by 2.4%, led by companies like Broadcom and Nvidia, amid concerns that their valuations had surged too high during the artificial intelligence tech boom.

The bond market also saw significant volatility, with Treasury yields initially declining, rebounding, and then falling again following the jobs report, which revealed that U.S. employers hired fewer workers in August than anticipated. This marks the second consecutive month where hiring has fallen below expectations, exacerbating concerns raised by recent data indicating weakness in manufacturing and other sectors of the economy.

This decline in the job market aligns with the Federal Reserve’s goal of curbing high inflation but is pushing the limits of Chair Jerome Powell’s intended strategy, according to Scott Wren, senior global market strategist at Wells Fargo Investment Institute.

The weaker-than-expected hiring has raised questions about the extent of the interest rate cuts that the Federal Reserve may implement at its upcoming meeting. Powell has hinted at a potential rate cut, which would be the first since the 2020 COVID crash, in an effort to protect the job market and prevent a recession after maintaining the federal funds rate at a two-decade high for over a year.

While rate cuts can boost investment prices, concerns linger on Wall Street that the Fed’s actions may be insufficient to prevent a recession, eroding corporate profits and nullifying the benefits of lower rates.

Despite some positive aspects of the jobs report, such as an improved unemployment rate and hiring pace that exceeded that of July, uncertainties remain regarding the Federal Reserve’s upcoming decisions. Treasury yields fluctuated in response to the market’s uncertainty about the Fed’s future moves.

In the stock market, tech companies like Broadcom and Nvidia suffered losses, despite reporting strong financial performance, due to concerns about their inflated valuations. The broader market saw widespread losses, with over 80% of S&P 500 stocks declining.

Elsewhere in the market, U.S. Steel experienced a 5.1% increase following comments from the CEO of rival Cleveland Cliffs regarding a potential acquisition. Stock markets in Europe and Asia also fell, with trading in Hong Kong halted due to a typhoon.