A not so encouraging jobs report put the cherry on top of a brutal opening week to September for investors Friday, as stocks stumbled to easily their worst week of an otherwise green 2024.
Traders work on the floor of the New York Stock Exchange on Thursday.
Friday morning’s monthly employment update revealed the U.S. created 142,000 jobs in August, lower than the 160,000 economists anticipated and that the economy added 86,000 jobs fewer than previously reported in June and July, indicating more weakness in the fragile labor market.
Ongoing concerns about the health of the U.S. economy caused stocks to sell off Friday, and the Dow Jones Industrial Average declined 1%, or about 400 points, the S&P 500 fell 1.7%, and the Nasdaq fell 2.6%.
The 30-company Dow closed the week down 3%, the benchmark S&P ended down 4% and the tech-leaning Nasdaq booked a 6% loss.
Those are the Dow’s and S&P’s steepest respective weekly drops since March 2023 and the Nasdaq’s worst week since Jan. 2022.
Very recent historical precedent shows reason for investors to take a collective deep breath: This holiday-shortened opening week of September was the worst four-day start to a month since August’s 5% drop, noted Bespoke Investment Group. Last month’s early selloff was similarly caused by a weaker than expected jobs report, but stocks quickly bounced back, with the S&P ending August up 2%.
Stocks perceived as most sensitive to the prospect of a recession were hardest hit by the slump. High-tech silicon chip stocks just had their fourth-worst week of the last 20 years as the iShares semiconductor exchange-traded fund (SOXX) declined 12%. That decline is only surpassed by the week ending March 20, 2020 at the start of COVID-19 lockdown orders, and the weeks ending Oct. 3 and 10, 2008, during the Great Recession, reflecting worries the artificial intelligence heavy and high-growth stocks may struggle if corporate customers tighten spending during a rockier economy. Unsurprisingly, many of this week’s worst-performing stocks were artificial intelligence tech names, with AI chip names like Broadcom, Intel and Nvidia all down about 15% this week, though discount retailer Dollar Tree was the S&P’s worst returner, sinking more than 20%. Dollar Tree’s decline was spurred by an earnings report in which management slashed its profit guidance due to what it characterized as a “most challenging” macroeconomic backdrop.
Even after the rockiness, stocks remain up big in 2024, with the S&P returning about 15%. September has been a brutal month for equities in recent years, falling an average of 5.7% during the month from 2020 to 2023. With steadying inflation and teetering job market, Wall Street’s attention is now honing in on the Federal Reserve, which is widely expected to lower interest rates later this month for the first time since March 2020, a move which typically predates strong equity returns.