NEW YORK (AP) — U.S. stocks are falling Friday as Wall Street questions whether the U.S. job market has slowed by just enough to convince the Federal Reserve to cut interest rates soon to help the economy, or by so much that a recession may be on the way.
After jumping to an early gain, the S&P 500 erased it and fell 0.6% below the all-time high it set the day before. The Dow Jones Industrial Average was down 334 points, or 0.7%, as of 10:45 a.m. Eastern time, after losing its own early gain of 148
points. The Nasdaq composite fell 0.5%.
The action was stronger in the bond market, where Treasury yields tumbled after the report from the U.S. Labor Department said employers across the country hired far fewer workers in August than economists expected. The U.S. government also said that earlier estimates for June and July overstated hiring by 21,000 jobs.
The disappointing numbers followed last month’s weaker-than-expected update, along with other lackluster reports in the intervening weeks, and traders now are betting on a 100% probability that the Fed will cut its main interest rate at its next meeting on Sept. 17, according to data from CME Group. Such cuts can give a kickstart to the economy and job market, but the Fed has held off on them so far this year because they can also give inflation more fuel.
Until now, the Fed has been more worried about the potential of inflation worsening because of President Donald Trump’s tariffs than about the job market. But Friday’s job numbers were weak enough that they could even push the Fed to consider cutting by a deeper-than-usual amount in two weeks, said Brian Jacobsen, chief economist at Annex Wealth Management.
“This week has been a story of a slowing labor market, and today’s data was the exclamation point,” according to Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management.
While the data on the job market is disappointing, it’s still not so weak that it’s screaming a recession is here. A big question for investors is whether the job market can remain in a balance where it’s not so strong that it prevents cuts to interest rates but also not so weak that the economy eventually craters.
Uncertainty about that helped lead to Friday's swings in the stock market. Wall Street needs things to go as hoped because it already sent stock prices to records amid expectations for a Goldilocks scenario where interest rates fall but the economy keeps chugging along.
On Wall Street, Broadcom leaped 9.1% after reporting better profit and revenue for the latest quarter than analysts expected. CEO Hock Tan said customers are continuing to invest strongly in chips used for artificial-intelligence technology, and the company expects revenue from them to accelerate to $5.2 billion in the current quarter.
Tesla rose 2.2% after proposing a payout package that could reach $1 trillion for CEO Elon Musk if the electric vehicle company meets a series of extremely aggressive targets over the next 10 years.
Smith & Wesson Brands jumped 8.3% after the gun maker delivered better results for the latest quarter than analysts expected. It reported a loss, but CEO Mark Smith said it saw good demand for its new products in what's traditionally a slow season for sales of firearms.
On the losing side of Wall Street was Lululemon, which dropped 17.3% drop after the yoga and athletic gear maker's revenue for the latest quarter fell short of analysts’ expectations. CEO Calvin McDonald pointed to disappointing results from its U.S. operation, as its international results saw positive momentum. CFO Meghan Frank said Lululemon is facing “industry-wide challenges, including higher tariff rates.”
The heaviest weight on the market was Nvidia, the chip company that's become the face of the AI boom. It's been facing criticism that its stock price charged too high, too fast and became too expensive amid Wall Street's rush into AI, and it fell 4%.
In stock markets abroad, indexes in Europe lost early gains to turn lower with Wall Street. That followed strength across much Asia.
In Tokyo, the Nikkei 225 rallied 1% after data showed accelerating growth in earnings for Japanese workers.
Chinese markets rebounded following three days of decline. Indexes jumped 1.4% in Hong Kong and 1.2% in Shanghai.
In the bond market, the yield on the 10-year Treasury tumbled to 4.07% from 4.17% late Thursday and from 4.28% on Tuesday. That’s a notable move for the bond market.
The two-year Treasury yield, which more closely tracks expectations for Fed action, fell even more. It dropped to 3.47% from 3.59% late Thursday.
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AP Writers Matt Ott and Teresa Cerojano contributed.
