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US stocks suffered their worst week in more than a year, as weak economic data and cautious commentary from central bankers added to investor concerns over a possible economic slowdown.
Wall Street’s benchmark S&P 500 dropped 1.7 per cent on Friday, bringing its loss for the week to 4.2 per cent — its worst weekly drop since March 2023.
Large tech stocks were particularly badly hit, and the tech-dominated Nasdaq Composite had its sharpest weekly fall since January 2022, dropping 5.8 per cent, including a 2.6 per cent fall on Friday.
The latest declines followed weaker than expected payroll data on Friday morning. US employers added 142,000 jobs in August, below a consensus of analysts’ forecasts of 160,000, although it was above the downwardly revised 89,000 jobs created in July. However, the unemployment rate dropped to 4.2 per cent.
Top Federal Reserve officials added to the cautious mood with comments that left the door open to half-point interest cuts. Fed governor Christopher Waller and John Williams, president of the New York Fed, endorsed a series of rate cuts this year given the fall in inflation and softening of the labour market.
The yield on the interest rate-sensitive two-year Treasury bond fell 0.09 percentage points to 3.66 per cent, while the yield on the benchmark 10-year fell 0.01 percentage points to 3.72 per cent. Yields move inversely to prices.
The dollar index, which tracks the US currency against a basket of other currencies, turned higher, up 0.1 per cent, having initially fallen after the data. The yen hit ¥142.4, its highest level since January.
Futures markets indicated on Friday that traders had reduced their bets on the probability of a 50-basis point cut following the payrolls report, but expectations were fluctuating widely. Swaps markets were pricing in close to four and a half quarter-point cuts by the end of the year, slightly more than prior to the data.
Fed chair Jay Powell said last month he was focused on the risks of a weaker labour market. He cautioned that the timing and pace of rate cuts were reliant on economic data.
Stock markets in Europe were also volatile after the jobs report. The Stoxx Europe 600 finished 1.1 per cent lower, as did the Cac 40 in Paris. The FTSE 100 in London dropped 0.7 per cent and the Dax in Germany closed down 1.5 per cent.
Japan’s Topix closed 0.9 per cent lower on Friday, while South Korea’s Kospi was down 1.2 cent and China’s CSI 300 index fell 0.8 per cent.
“The risk appetite is rather concentrated in US data . . . given the sagginess of Chinese growth,” said Trinh Nguyen, senior economist for Emerging Asia at Natixis in Hong Kong.
“Markets will need reassurance of a not too slow US economy but at the same time weak enough for the Fed to not fear [an] inflation resurgence.”
Crude oil futures gave up early gains to hit their lowest levels of the year, even after Opec+ members agreed late on Thursday to delay planned production increases for at least two months. Brent, the international benchmark, lost 2.5 per cent to $70.90 while West Texas Intermediate, its US counterpart, fell 2.6 per cent, to $67.37.
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