U.S. stocks experienced their worst week in over a year, as weak economic data and cautious remarks from central bankers heightened investor concerns about a potential economic slowdown.
The S&P 500, Wall Street’s benchmark index, fell 1.7% on Friday, bringing its weekly loss to 4.2%—the sharpest decline since March 2023. Tech stocks were particularly hard hit, with the Nasdaq Composite seeing its steepest weekly drop since January 2022, falling 5.8%, including a 2.6% slide on Friday.
The selloff followed disappointing payroll data, as U.S. employers added 142,000 jobs in August, falling short of the expected 160,000 but still above the revised 89,000 jobs created in July. Despite this, the unemployment rate dipped to 4.2%.
Further weighing on sentiment were comments from top Federal Reserve officials, who indicated the possibility of half-point interest rate cuts. Fed governor Christopher Waller and New York Fed president John Williams supported rate cuts this year, citing easing inflation and a cooling labor market.
In response, the yield on the two-year Treasury bond, sensitive to interest rate changes, fell by 0.09 percentage points to 3.66%, while the benchmark 10-year yield dipped by 0.01 percentage points to 3.72%. Bond yields move inversely to their prices.
The dollar index, which measures the U.S. currency against a basket of others, rose 0.1% after initially declining on the jobs data. Meanwhile, the yen strengthened to ¥142.4, its highest level since January.
On Friday, futures markets showed that traders had scaled back bets on a 50-basis point interest rate cut following the payroll report, although expectations remained volatile. Swaps markets were pricing in nearly four and a half quarter-point cuts by year-end, slightly more than before the data release.
Fed Chair Jay Powell emphasized last month that his focus was on the risks of a weakening labor market, and he warned that the timing and pace of rate cuts would depend on future economic data.
European stock markets were also unsettled after the U.S. jobs report. The Stoxx Europe 600 dropped 1.1%, as did Paris’s Cac 40, while London’s FTSE 100 slipped 0.7%, and Germany’s Dax fell 1.5%.
In Asia, Japan’s Topix closed 0.9% lower on Friday, with South Korea’s Kospi down 1.2%, and China’s CSI 300 index off by 0.8%.
“The market’s risk appetite is largely focused on U.S. data, given the sluggishness of Chinese growth,” said Trinh Nguyen, senior economist for Emerging Asia at Natixis in Hong Kong. “Investors need reassurance of a U.S. economy that’s not slowing too much, but weak enough to keep the Fed from fearing a resurgence in inflation.”
Crude oil futures erased earlier gains, hitting their lowest levels of the year despite OPEC+ members agreeing on Thursday to delay production increases for at least two months. Brent crude, the international benchmark, fell 2.5% to $70.90, while West Texas Intermediate, its U.S. counterpart, dropped 2.6% to $67.37.