A tenuous rally evaporated within the initial hour of trading on Friday as expectations for rate cuts succumbed to concerns regarding an economic slowdown, prompted by disappointing job figures for August. The S&P 500 experienced a decline of 0.5%, whereas the Nasdaq Composite saw a decrease of 0.3%. The Dow Jones Industrial Average experienced a decline of 277 points, equivalent to a decrease of 0.6%.

All three leading indexes achieved new record intraday highs earlier in the session. At their peaks, the broad market index, the tech-centric Nasdaq, and the blue-chip Dow recorded increases of approximately 0.5%, 0.8%, and 0.3%, respectively. The U.S. economy experienced an increase of 22,000 jobs in August. That figure falls short of the 75,000 anticipated by economists. The unemployment rate increased to 4.3%, aligning with forecasts. Market participants are anticipating that the reading will bolster the Federal Reserve’s argument for proceeding with a projected rate cut during its policy meeting in September. Trading in Fed funds futures indicates that benchmark interest rates are expected to decrease by a quarter percentage point when the central bank reaches a decision on September 17.

Additionally, traders have positioned a half-point cut for mid-month in response to the payrolls data. That represents an increase from a previously negligible probability of a substantial reduction the day prior. “Slower job gains, combined with an uptick in the unemployment rate and moderating wage growth, support the view that the rate of positive change in the labor market has slowed significantly,” stated Jamie Cox. “These employment data provide the Federal Reserve with ample justification to adjust its risk assessment and consider a reduction in interest rates in the upcoming fortnight.” Investors approached the August nonfarm payrolls report with equities having recently achieved a new record high. Market participants are wagering that rate reductions will invigorate an economy that is showing signs of weakness, yet remains far from the brink of recession. However, the most recent employment data, which indicates that the June payrolls figure has been adjusted to reflect the first job loss since the pandemic, could potentially heighten concerns regarding a recession.

Hock Tan, revealed during a call with analysts that Broadcom has obtained $10 billion in custom AI chip orders from a new client. Nvidia shares experienced a decline of 2%, as the robust performance from Broadcom could indicate an increase in competition for the prominent player in the AI sector. Palantir, another favored entity in the artificial intelligence sector that has faced recent pressures, also experienced a decline of 2%.