Wall Street endured another turbulent day on Friday, capping off its worst week since March 2023. The S&P 500 fell 1.7%, while the tech-heavy Nasdaq composite plunged 2.6%, driven down by key technology stocks like Broadcom and Nvidia. These companies, once flying high during the artificial intelligence (AI) boom, dragged the market lower as concerns grew that their valuations had soared too high.
The Dow Jones Industrial Average also suffered, dropping 410 points (1%) after initially gaining 250 points earlier in the day. The volatile swings were exacerbated by a disappointing jobs report for August, which revealed that US employers hired fewer workers than economists had predicted. It was the second consecutive month of weaker-than-expected hiring, contributing to rising concerns about the broader economy.
The weak jobs data, combined with recent reports of sluggish manufacturing and other economic sectors, has led to increased anxiety over whether the Federal Reserve will cut its main interest rate in an attempt to stave off recession. However, the timing of such cuts remains uncertain. Scott Wren, senior global market strategist at Wells Fargo Investment Institute, noted, “The data is now testing Chair Powell’s stated limits,” referring to Federal Reserve Chair Jerome Powell’s aim to cool inflation without triggering a significant economic downturn.
Tech giants Broadcom and Nvidia bore the brunt of the market sell-off. Broadcom’s stock plummeted 10.4% despite exceeding quarterly earnings expectations, largely due to concerns over its revenue projections for the next quarter falling slightly short. Nvidia, another AI-driven stock, saw its shares drop 4.1% on Friday and 13.9% for the week. Despite strong earnings earlier this year, investors have begun questioning whether Nvidia’s stock price has risen too high.
In contrast, US Steel bucked the broader market trend, climbing 4.3% on news that Cleveland Cliffs remained interested in acquiring the company, should the White House block its proposed sale to Japan’s Nippon Steel.
Amidst the uncertainty, the Federal Reserve’s next moves remain a focal point. While a cooling labor market is what the Fed has aimed for to curb inflation, concerns about tipping the economy into a recession are growing. Christopher Waller, a member of the Fed’s board of governors, emphasized that while the labor market has cooled, he doesn’t believe the economy is in a recession or headed toward one. He cautioned against overreacting to the latest data, stating that the pace and depth of rate cuts are still up for debate.
The bond market also experienced dramatic swings, with Treasury yields fluctuating throughout the day as traders speculated on the Fed’s next steps. The two-year Treasury yield dipped as low as 3.64% before climbing back to 3.76%, only to settle at 3.66% following Waller’s remarks.
While the week ended on a bleak note for Wall Street, some analysts remain optimistic. Despite the market downturn, the S&P 500 remains only 4.6% below its all-time high set in July and is still up 13.4% for the year—a strong performance overall. Wren urged investors to avoid panicking, emphasizing that a slowdown in economic growth does not spell disaster for the markets.
Elsewhere, global markets mirrored the decline, with indexes falling across much of Europe and Asia. Trading in Hong Kong was halted due to a typhoon, but many other international markets saw similar downturns as fears of a global economic slowdown loomed.
As investors brace for the Federal Reserve’s upcoming meeting, all eyes remain on whether it will cut interest rates in an attempt to stabilize the economy—or whether its efforts to cool inflation could come at the cost of a recession.