Stock selloff accelerates following jobs-fuelled “growth scare”
The selloff in stocks intensified and bond yields plunged after a weak jobs report fueled worries the Federal Reserve has been too slow to cut interest rates, risking a more pronounced economic slowdown.
Equities tumbled after data showed US hiring slowed by more than forecast in July and the unemployment rate rose to the highest level in nearly three years. A tumble in key technology companies sent the Nasdaq 100 down 10% from its peak, matching the definition of a “correction”. A rally in Treasuries extended into a seventh straight day.
The jobs report adds to a week of disappointing data that raise concerns of a more abrupt downshift in the economy. The figures may give Fed officials some reason to believe that their policies are cooling the labor market too much rather than reverting to its healthy pre-pandemic trend.
“Bad news is no longer good news for stocks,” said John Lynch at Comerica Wealth Management. “Of course, we’re in a period of seasonal weakness, but sentiment is fragile given economic, political, and geopolitical developments. Pressure will escalate on the Federal Reserve as market interest rates will continue the attempt to force their hand.”
The S&P 500 slid 1.5%. The Nasdaq 100 sank 2.1%. The Russell 2000 tumbled 3.3%. The yield on 10-year Treasuries declined 12 basis points to 3.86%. The dollar fell 0.7%. Intel Corp. plunged 28% on a grim growth forecast.
Oh dear, has the Fed made a policy mistake? The labor market’s slowdown is now materializing with more clarity. A September rate cut is in the bag and the Fed will be hoping that they haven’t, once again, been too slow to act.
Panic Treasury buying continues as unemployment craters. The Fed has egg on their face. After raising our outlook to four
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