U.S. stocks closed lower on Friday, forcing all three major indexes to post their biggest weekly percentage losses in years, after a weak jobs report kept investors wondering how much the Federal Reserve would lower interest rates in the coming weeks.
For the week, the S&P 500 lost 4.25% and the Dow fell 2.93%. In both cases, these were the largest weekly percentage losses since March 2023. The Nasdaq fell 5.77% for the week, which was the largest weekly percentage loss since January 2022.
U.S. employers added a disappointing 142,000 jobs in August, below the Bloomberg consensus estimate of 163,000 jobs. The July figure was revised down to 89,000, also below estimates. The unemployment rate edged down to 4.2% from 4.3% in July.
Slowing job growth confirms that the economy is weakening, virtually guaranteeing that the Federal Reserve will cut rates when it concludes its policy meeting on Sept. 18. However, it may also suggest that the Fed’s rate cuts may come too late for the economy to achieve a soft landing, said Lou Basenese, president and chief market strategist at MDB Capital in New York.
“If we start seeing layoffs in the next month or two, that will suggest it came too late,” he said.
Bond markets had been expecting rate cuts, with the yield on two-year Treasury notes falling to the lowest level since 2022.
How big will the Fed’s rate cut be?
Federal Reserve Governor Christopher Waller said Friday that “the time has come” for the U.S. central bank to begin a series of interest rate cuts, adding that he was open-minded about the size and pace.
The CME Fed Watch tool, which calculates the likelihood of a Fed decision, shows a 71% chance of a quarter-point cut at the Fed’s next meeting. The odds of a half-point cut stood at 29%.
In 2022 and 2023, the Fed raised its key rate from near zero to a 23-year high of 5.25% to 5.5% to combat inflation, and the rate has remained there since.
Corporate news also weighs on stocks
Broadcom fell 10% to $137.00 after the chipmaker forecast fourth-quarter revenue slightly below estimates, hurt by sluggish spending in its broadband segment.
Super Micro Computer lost 6.87% to $386.46 after analysts at JP Morgan downgraded the AI server maker’s stock to neutral from overweight.
(Reuters contributed to this report.)
Medora Lee is a personal finance, markets and money reporter for USA TODAY. She can be reached at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news Monday through Friday.
This article originally appeared on USA TODAY: Dow, S&P 500 and Nasdaq fall as market awaits Fed rate cut after jobs data