The three major U.S. stock indices moved sharply to the downside after hitting new records at the start of trading on September 5. After the opening of the stock exchanges, investors' optimism was linked to the prospects of Fed rate cuts amid weak employment data for August. However, as the trading session progressed, these hopes were replaced by concerns about a slowdown in the US economy and a possible recession.

Details

- The main U.S. stock index S&P 500 at the trading on September 5 sagged in the moment by 0.9%, although then slowed to about -0.4%. At the beginning of the session, it rose to a historical record of 6532.65 points.

- The Nasdaq Composite index, in which technology companies are heavily weighted, fell about 0.8% after the same rise to another record of 21,878.81 points. At the time of publication of this text, the index was losing about 0.2%.

- The blue-chip Dow Jones Industrial Average index was also down about 0.9%, but slowed then to -0.5%. The Dow also hit an all-time high at the start of the trading day.

- The Russell 2000 index of small-cap companiessagged the least, down about 0.5% at its low for the day before slowing to -0.15%.

- "Wall Street Fear Index" VIX at the same time jumped almost 11% to 16.9 points (20 points is considered an alarming mark).

What happened

Investor sentiment on Friday was affected by the publication of weaker-than-expected data on employment in August: investors' initial joy at the prospect of a rate cut soon was replaced by fears of an economic slowdown, CNBC notes. In August in the U.S. in the non-farm sectors of the economy appeared only 22,000 jobs in the Wall Street consensus forecast of 75,000.

"It's simple: fewer full-fledged jobs - lower costs - lower corporate profits," explained former JPMorgan strategist Marko Kolanovic.

Unexpectedly low employment growth initially convinced the market that the US Federal Reserve could start cutting interest rates in September. However, as some strategists warned, this turned out to be an "initial reaction". "History shows that if lower [government bond] yields signal a significant slowdown in [economic] growth, that's a negative sign for stocks," Matt Maley, chief market strategist at Miller Tabak, noted in a Bloomberg statement.

Revised data for June on Friday showed the first job cuts in 4.5 years - since the coronavirus pandemic, Reuters noted. In addition, the number of unemployed exceeded job openings in July - also for the first time in a comparable period. The state of the labor market could kick-start rising recession fears, according to CNBC and MarketWatch

This article was AI-translated and verified by a human editor

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