Dow, S&P 500, Nasdaq have worst session since 2022

U.S. stocks registered the worst session since 2022 after a string of weak economic reports jolted investor fears that a recession may be brewing. 

All three of the major benchmarks fell over 1.5% with the Dow Jones Industrial Average, off nearly 1,000 points at midday before trimming some losses to end down over 611 points. 

The tech-heavy Nasdaq Composite fell into correction territory, down 10% from its peak reached in July of 18,647, it lost 2.4% on the day. 

A paltry employment report which saw just 114,000 jobs created last month and an uptick in unemployment to 4.3% added fuel to the fire on Friday. Growth has been on the decline since May.  

Even so, the 4th straight jump in the jobless rate triggered the so-called Sahm Rule named after former Federal Reserve economist Claudia Sahm. The rule has successfully predicted every recession since 1970.

"We have gone from being concerned about inflation to being concerned about a recession, I think that is probably a bit premature here. I think its better to look at things on a three-month average" Art Hogan of B Riely Wealth Management told Gxstocks. 

This after weekly jobless claims jumped more than expected to an 11-month high on Thursday, which was followed by Intel’s announcement that it plans to cut 15% of its workforce and pause its dividend. Intel shares tumbled 26% in the worst day since the early 80s. 

WHAT HAPPENED TO INTEL?

10 of the 11 largest S&P 500 sectors fell led by consumer discretionary stocks which fell 4% with declines in Walmart and Target as well as Amazon, which told investors that shoppers were turning more cautious in its latest earnings report. 

On the flip side, consumer staples, considered more defensive, turned marginally higher late Friday while healthcare and utilities, also safer plays, fell the least. 

Additionally, the ISM Manufacturing report fell below 50, a sign of contracting, and the sector posted another month of job cuts in July, which brings the total loss to 1,700 since May.  

MANUFACTURERS TALK 2024 ELECTION AND WHAT THEY NEED

Federal Reserve Chairman Jerome Powell, at this week’s meeting before the jobs data, signaled that a rate cut is likely in September with about 80% of market participants expecting a larger easing of as much as 50 basis points, which would bring rates from 550-525 to 475-500, according to the CME’s FedWatch Tool, which tracks future rate moves. 

"The report highlights the risk of a steeper set of reductions in the policy rate this year than we had envisioned prior to Friday’s data. Still, we think the Fed would need to see another soft print in August data before it considers starting the cycle with a larger 50 basis point rate cut in September" wrote Yelena Shulyatyeva, Senior US Economist at BNP Paribas in a note to clients.

Federal Reserve Chair Jerome Powell speaks at a news conference following a Federal Open Market Committee meeting at the William McChesney Martin Jr. Federal Reserve Board Building on July 31, 2024, in Washington, D.C. (Photo by Andrew Harnik/Getty Images / Getty Images)

THE US HOUSING MARKET IS 'STUCK' AND MIGHT REMAIN THAT WAY UNTIL 2026

Gold, a traditional flight to safety, was also under pressure. However, it is hovering near its record $2,470 an ounce. 

In cryptocurrencies, Bitcoin slid to the $63,000 level and is off over 13% from its all-time high of $73,462.59 reached in March. The yellow metal has gained over 17% this year. 

Gxstocks' Megan Henney contributed to this report. 

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