US markets drop on labour market concerns and tech sell-off
US equity markets fell on Friday night, driven by concerns about a cooling labour market and a significant sell-off in the tech sector. Over the week, the Nasdaq declined by 5.89%, the S&P 500 dropped 4.25%, and the Dow Jones lost 2.93%.
Mixed signals from jobs report
The much-anticipated jobs report delivered mixed signals. Payrolls grew by 142,000, falling short of the 165,000 expected, while the figures for the previous two months were revised downward. July’s already weak number was adjusted down to 89,000 from 114,000. On a positive note, the unemployment rate edged lower to 4.2%, down from 4.3%.
Although the data shows signs of a slowdown, it wasn’t weak enough to ensure a 50 basis point (bp) interest rate cut. Comments from Federal Reserve (Fed) officials Williams and Waller suggest the Fed may lean towards a 25 bp cut at its next meeting on 18 September, as it enters the blackout period ahead of the Federal Open Market Committee (FOMC) meeting.
Tech sector struggles as major players drop
In the tech sector, major companies like Tesla, Alphabet, and Amazon suffered significant losses on Friday, with their shares dropping by 8.45%, 4%, and 3.65%, respectively. Chipmakers also took a hit, as Broadcom plunged by 10.3%, ARM dropped 4.71%, and Nvidia was down 4.1%.
All eyes are now on this week’s consumer price index (CPI) and producer price index (PPI) reports. Ahead of these updates, the rates market begins the week pricing in 32 bps of Fed rate cuts for September, with a total of 114 bps expected by year-end.
What to expect from CPI
Date: Wednesday, 11 September at 10.30pm AEST
In July, US annual headline inflation cooled for the fourth consecutive month, falling to 2.9%, its lowest level since March 2021. This was down from 3% in June and below the expected 3%. The annual core inflation rate, which excludes volatile food and energy prices, also eased to 3.2%, matching market expectations and down from 3.3% in the previous month.
For August, the forecast is for headline inflation to ease further to 2.6%, with core inflation remaining steady at 3.2% year-over-year (YoY).
