The S&P 500 (SP500) on Friday It fell by 4.25% for the holiday-shortened week, which ended at 5,408.42 points, posting losses in all four sessions. Its companion SPDR S&P 500 ETF Trust (NYSERCA:SPY) fell by 4.14% for the week.
There was no way to sugarcoat it: it was just… Brutal week for Wall Street. The benchmark index recorded its worst weekly performance since early March 2023. Its peer, the Nasdaq Composite, has a strong tech presence.COMP:IND), fared even worse, recording its worst week since January 2022.
Both indicators have recorded their worst starts to September (first four trading days) since 2001, according to Bespoke Investment Group.
The sell-off was fueled by concerns about economic growth following a string of weak data during the week, especially in the labor market. That, coupled with historic weakness in September, prompted investors to pull out of growth sectors like technology and flock to safe assets like bonds.
The S&P 500 information technology sector plunged more than 7% over the week. Meanwhile, US Treasury yields fell as traders bought bonds. The 10-year yield (US10Y) retreated 20 basis points over the week, while the 2-year yield (US10Y) fell 27 basis points.
On Tuesday, investors returning from the long Labor Day weekend welcomed weak manufacturing data, which was enough to undermine the positive sentiment that had permeated markets in late August. All three major Wall Street indexes ended up recording their worst day since “Black Monday of 2024.”
On Wednesday, government data showed the number of job openings in July fell to a three-and-a-half-year low. That was followed by a report from Challenger, Gray & Christmas on Thursday showing job cuts in August nearly tripled from July. Both sets of indicators dampened the mood ahead of Friday’s crucial nonfarm payrolls report.
That data is finally in, showing weaker-than-expected job growth in August and significant downward revisions to the June and July figures. The report stoked further concerns about growth and also sparked a debate among experts about what the size of the Federal Reserve’s expected interest rate cut later this month should be. Attention now turns to next week’s consumer price index report for further clues, though inflation has taken a backseat in terms of concerns.
“There are some jobs reports over the years that are closely followed by markets and others that are more of an afterthought. (Friday’s) was the first, and the market reaction leaves no doubt about the importance of the jobs data,” Rick Rieder, chief investment officer for global fixed income at BlackRock (BLK), said on X (formerly Twitter).
“We can see the market focus shifting from inflation to labor market data as the forward premiums around important data releases are priced in. It is clear that labor market data has overtaken inflation as the most important focus for both markets and the Fed.”
“While recent labor market data is clearly weaker, it is far from a doom-laden indicator of recession, a hard landing, or some ominous harbinger of future consumer weakness.”
“Rather, we continue to believe the labor market is moderating on the back of strong post-COVID demand. Indeed, almost none of the recent unemployment increases were due to permanent job losses; rather, they were driven by temporary (weather-related) layoffs in August, which were reversed this month, and a steady flow of new hires,” Rieder said.
As for the weekly performance of the S&P 500 (SP500) sectors, nine of the 11 ended in the red. The technology sector topped the list of losers with a 7.1% drop. The consumer staples and real estate sectors were the two that gained. See below for a breakdown of the performance of the sectors, as well as the accompanying SPDR Select Sector ETFs from the close on August 30 to the close on September 6:
#1: Consumer staples +0.56%and the Consumer Staples Select Sector SPDR Fund ETF (XLP) +0.58%.
#2: Real estate +0.15%and the SPDR Real Estate Select Sector ETF (XLRE) +0.18%.
#3: Utilities -0.50%and the Utilities Select Sector SPDR Fund ETF (XLU) -0.50%.
#4: Health care -2.13%and the Health Care Select Sector SPDR Fund ETF (XLV) -2.07%.
#5: Discretionary consumption -2.86%and the SPDR Consumer Discretionary Select Sector ETF (XLY) -2.52%.
#6: Finance -3.20%and the Financial Select Sector SPDR ETF (XLF) -3.17%.
#7: Industrialists -4.35%and the Industrial Select Sector SPDR Fund ETF (XLI) -4.24%.
#8: Materials -4.84%and the Materials Select Sector SPDR Fund ETF (XLB) -4.66%.
#9: Communication services -5.05%and the Communication Services Select Sector SPDR Fund (XLC) -4.07%.
#10: Energy -5.63%and the Energy Select Sector SPDR ETF (XLE) -5.77%.
#11: Information Technology -7.06%and the Technology Select Sector SPDR Fund ETF (XLK) -7.45%.
For investors looking to track the benchmark S&P 500 (SP500), here are some exchange-traded funds of interest: (VOO), (IVV), (RSP), (SSO), (UPRO), (SH), (SDS), and (SPXU).
For investors looking ahead to what’s happening, check out the Seeking Alpha Catalyst Watch for next week’s breakdown of actionable events that stand out.