The US stock market plunged into chaos on Friday as investors digested a streak of negative economic data and disappointing earnings from megacap tech companies.
All three major US indexes closed more than 1.5% lower, with tech and small-caps taking the biggest hit.
The Dow Jones Industrial Average tumbled nearly 1,000 points at intraday lows.
The S&P 500 slid 3% in two days, while the tech-heavy Nasdaq Composite fell almost 5%, landing in correction territory.
The sell-off gained momentum on Thursday with a slew of weak data points. Jobless claims climbed near a one-year high, and manufacturing data fell below estimates.
Investors were further discouraged by disappointing earnings reports from Amazon and Intel. Amazon missed its Q2 sales forecast and issued light guidance for Q3.
Intel announced plans to cut 15,000 workers and gave a grim growth forecast, leading its stock to plummet as much as 30%, the biggest single-day decline since 1982.
Stock futures were already deeply in the red on Friday morning.
Investors threw in the towel after the jobs report, which showed the economy added 61,000 fewer jobs than expected in July and saw unemployment unexpectedly spike to 4.3%, triggering the Sahm rule recession indicator.
The sell-off signals a shift in how investors interpret weak economic data. Months ago, signs of a slowing economy would bolster expectations for Fed rate cuts, seen as rocket fuel for stocks.
Now, with a cut priced in for September, investors worry the economy is weakening too rapidly.
Bad news is no longer good news for stocks, said John Lynch, CIO at Comerica Wealth Management.
Pressure will escalate on the Federal Reserve as market interest rates will continue the attempt to force their hand.
Some question whether the Fed miscalculated its rate cut path. Oh dear, has the Fed made a policy mistake?
The labor market’s slowdown is now materializing with more clarity, said Seema Shah, chief global strategist at Principal Asset Management. She noted job gains had dropped below levels typical of a solid economy.
She added, A September rate cut is in the bag, and the Fed will be hoping they haven’t, once again, been too slow to act.
New York Fed economists predict a 56% chance the economy could enter a recession by June next year. Meanwhile, rate-cut forecasts on Wall Street have become more dovish.
Bets on a 50-basis-point cut in September have jumped to 75%, up from 12% a week ago, according to the CME FedWatch tool.
This is further proof that the economy is slowing, which has many worried the Fed is now firmly behind the eight ball, said Ryan Detrick, chief market strategist at Carson Group.
It’s becoming clear the Fed should be more worried about the business than inflation, increasing the chances of a 50-basis-point cut in September.
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