In a dramatic end to the week, the stock market experienced significant losses as a weaker-than-expected jobs report for July ignited fears of a looming recession. The Dow Jones Industrial Average fell sharply, while the Nasdaq Composite entered correction territory, underscoring heightened concerns about economic stability. The S&P 500 also saw substantial declines, reflecting broad-based investor anxiety. The Labor Department’s report, which revealed a mere 114,000 job additions and a rise in the unemployment rate to 4.3%, has intensified worries about the labour market’s strength and the Federal Reserve’s monetary policy. This economic backdrop has led to a cautious market sentiment, with investors closely monitoring central bank decisions and potential impacts on growth and financial markets.

Key Takeaways:

  • Dow Jones Drops Over 600 Points: The Dow Jones Industrial Average plummeted 610.71 points, or 1.51%, to finish at 39,737.26. At its session low, the index was down 989 points, underscoring the heightened market volatility. The sharp decline reflects investor fears of a recession following a disappointing jobs report that suggested the economy is slowing more than anticipated.
  • Nasdaq Enters Correction Territory: The Nasdaq Composite lost 2.43% to close at 16,776.16, marking a decline of more than 10% from its recent all-time high. This correction signals significant concerns in the tech sector, particularly related to high levels of AI-related capital spending. Major tech stocks like Amazon and Intel saw substantial declines, exacerbating the downturn.
  • S&P 500 Falls Nearly 2%: The S&P 500 dropped 1.84%, ending at 5,346.56. All 11 sectors of the S&P 500 closed lower, with the technology sector experiencing the steepest declines, down nearly 6%. The broad-based sell-off underscores the widespread economic concerns affecting various industries, as investors reassess growth prospects and risk appetite.
  • Weak Jobs Report Raises Recession Fears: The U.S. added only 114,000 nonfarm payrolls in July, a significant slowdown from the 179,000 jobs added in June and well below the expected 185,000. The unemployment rate rose to 4.3%, the highest since October 2021. This data suggests a cooling labour market, heightening fears that the economy may be heading towards a recession. The weak job growth adds pressure on the Federal Reserve to reconsider its monetary policy stance.
  • Treasury Yields Decline as Investors Seek Safety: The yield on the 10-year Treasury fell to 3.79%, its lowest level since December, as investors moved towards safer assets amidst economic uncertainty. The 2-year Treasury yield also dropped, ending at 3.882%. This flight to safety indicates significant investor anxiety about the economic outlook and potential policy missteps by the Federal Reserve.
  • European Markets Extend Losses: European stocks mirrored the U.S. downturn, with the Stoxx 600 falling 2.82%, marking its worst day since December 2022, and dropping below the 500-point mark for the first time since April. The FTSE 100 Index declined by 1.34% to 8,174.71, and the CAC 40 Index fell 1.89%. The broad sell-off in Europe was driven by fears of a global recession, worsened by weak U.S. economic data and recent central bank actions, including the Bank of England’s rate cut.
  • Asian Markets Plunge on Recession Fears: Japan’s Nikkei 225 tumbled 5.81% to end at 35,909.7, marking its worst day since March 2020, and dropping below the 36,000 mark for the first time since January. The broader Topix saw an even larger loss of 6.14%, marking its worst day in eight years. South Korea’s Kospi fell 3.65% to 2,676.19, and the Kosdaq dropped 4.20%. Hong Kong’s Hang Seng index was down 2.32%, while mainland China’s CSI 300 posted a smaller loss of 1.02%, closing at 3,384.39. The widespread declines across Asia reflect heightened fears of a global economic slowdown and recession, further impacted by weak manufacturing data and regional economic concerns.
  • Oil Prices Drop Amid Economic Concerns: U.S. crude oil prices fell nearly 3% on Friday, with the West Texas Intermediate contract for September settling at $76.81 a barrel, while Brent crude dropped 3.41% to $76.81 per barrel. The decline in oil prices reflects growing concerns about weak economic growth stifling demand, despite escalating tensions in the Middle East that could impact supplies. The drop in prices indicates a cautious outlook for global energy consumption amidst economic uncertainties.

FX Today:

  • Gold Slides from Weekly Highs as Traders Lock in Gains: The XAU/USD trades at $2,430, down 0.60%. Gold price has retreated toward $2,404-$2,410, which could be attributed to profit-taking ahead of the weekend, as US yields and the dollar remain at weekly lows. From a technical standpoint, XAU/USD is set to remain bullish, which could initiate a challenge past the $2,500 mark. On further weakness, prices could fall below $2,400, which could pave the way for a pullback to the 50-day moving average (DMA) at $2,364, before testing the 100-DMA at $2,337.
  • EUR/USD Bounces After NFP Misfire Pummels Greenback: The EUR/USD pair climbed back over 1.0900 after a disappointing US Nonfarm Payrolls (NFP) report. The price action still has ground to cover before making another attempt at breaking through 1.0950. If bidders extend momentum, EUR/USD is on track to reject from the 200-day Exponential Moving Average (EMA) at 1.0802, while sellers aim to push bids back down towards the last swing low below 1.0700.
  • GBP/USD Clings to Daily Gains Near 1.2800 After Weak US Jobs Data: GBP/USD clung to daily gains around 1.2800 in the second half of the day on Friday. The US added 114,000 nonfarm payrolls in July, significantly missing the market expectation of 175,000, which triggered a USD selloff. GBP/USD started to edge higher after testing the 1.2710-1.2700 support area. Meanwhile, the Relative Strength Index (RSI) on the four-hour chart remains slightly below 30 after recovering from below-20, suggesting that the pair is correcting its oversold conditions. On the upside, 1.2750 aligns as immediate resistance before 1.2780 and 1.2800. If GBP/USD falls below the 1.2710-1.2700 area, 1.2620 could be the next bearish target.
  • USD/JPY Sinks to Five-Month Lows Fuelled by Reignited US Recession Fears: The USD/JPY pair collapsed to a five-month low of 146.47 on Friday following the release of worse-than-expected US economic data that increased the odds of a Federal Reserve rate cut at the September meeting. Consequently, the US 10-year Treasury bond yield, closely correlated to this pair, tumbled sharply below the 4% threshold, while the major dropped after hitting a daily high of 149.77. For a bearish continuation, sellers need a daily close below 146.48, with subsequent supports at 146.00 and 145.50. Further downside lies at the 145.00 mark. Conversely, if buyers lift the exchange rate past 147.00, they could push the spot price higher until facing the latest cycle low turned resistance at 151.86.

Market Movers:

  • Intel Plummets on Weak Guidance and Layoffs: Intel experienced a dramatic decline, with shares plummeting over 26%. The chipmaker’s disappointing guidance and announcement of significant layoffs, totalling 15,000 employees, spooked investors. This marks one of the worst single-day performances for Intel, reflecting broader concerns in the tech sector.
  • Amazon Slides on Disappointing Outlook: Amazon’s stock fell 8.8% after the company reported a disappointing third-quarter outlook. The e-commerce giant now expects revenue between $154 billion and $158.5 billion for the fourth quarter, falling short of analysts’ expectations of $158.24 billion. This miss has raised concerns about the sustainability of Amazon’s growth amidst rising capital expenditures.
  • Snap Tumbles on Weak Guidance: Snap saw its shares decline by 26% following weaker-than-expected third-quarter guidance. The social media company now anticipates adjusted earnings in the range of $70 million to $100 million, significantly below the $110 million forecasted by analysts. This sharp drop underscores the challenges Snap faces in sustaining its growth.
  • Cloudflare Advances After Raising Forecast: Cloudflare’s shares climbed approximately 7% after the IT firm raised its full-year forecast. The company now expects full-year adjusted earnings between 70 cents and 71 cents per share, up from the previous range of 60 cents to 61 cents per share, signalling strong business performance and investor optimism.
  • DoorDash Jumps on Strong Revenue: Shares of DoorDash jumped 8.3% after the company reported second-quarter revenue that surpassed Wall Street estimates. DoorDash posted revenue of $2.63 billion, exceeding the $2.54 billion forecasted by analysts, highlighting the company’s strong market position and growth potential in the food delivery sector.
  • Twilio Climbs on Earnings Beat: Twilio’s shares climbed 12% after the cloud communications company reported second-quarter results that surpassed analysts’ estimates on both the top and bottom lines. Twilio posted an adjusted 87 cents per share on revenue of $1.08 billion, exceeding expectations of 70 cents a share on $1.06 billion in revenue, showcasing its strong business momentum.
  • Atlassian Drops on Disappointing Guidance: Atlassian’s shares fell more than 17% after the software company issued disappointing forward guidance. Atlassian now forecasts fiscal first-quarter revenue between $1.149 billion and $1.157 billion, below the $1.16 billion expected by analysts, reflecting a challenging macroeconomic environment.

As the week concluded with a significant market downturn, driven by a weak jobs report and growing recession fears, investors are grappling with the implications for future economic stability. The dramatic declines in major indices, with the Dow losing over 600 points and the Nasdaq entering correction territory, highlight the market’s vulnerability amidst ongoing economic uncertainties. Key sectors, particularly technology and energy, faced substantial losses, reflecting broader concerns about growth prospects and capital expenditures. As investors digest these developments, the focus shifts to the Federal Reserve’s next moves and the potential impact on market dynamics, leaving the financial landscape poised for continued volatility in the weeks ahead.