NEW YORK (AP) — A sell-off for stocks has made it all the way around the world, and Wall Street is tumbling again Friday on worries about whether the U.S. economy’s growth can hold up until the Federal Reserve cuts interest rates.
The S&P 500 was 1.6% lower in early trading and on track for its first back-to-back loss of more than 1% since April. The Dow Jones Industrial Average was down 481 points, or 1.2%, as of 9:35 a.m. Eastern time, and the Nasdaq composite was 2.6% lower.
A report showing hiring by U.S. employers slowed last month by much more than economists expected sent fear through markets, with both stocks and bond yields dropping sharply. It followed a batch of weaker-than-expected reports on the economy from a day earlier, including a worsening for U.S. manufacturing activity, which has been one of the areas most hurt by high rates.
It was just a couple days ago that U.S. stock indexes jumped to their best day in months after Fed Chair Jerome Powell gave the clearest indication yet that inflation has slowed enough for cuts to interest rates to begin in September. Now, worries are rising that the Fed kept its main interest rate at a two-decade high for too long in its zeal to stifle inflation. A rate cut could take months to a year to filter through the economy.
“The Fed is seizing defeat from the jaws of victory,” said Brian Jacobsen, chief economist at Annex Wealth Management. “Economic momentum has slowed so much that a rate cut in September will be too little and too late. They’ll have to do something bigger than” the traditional cut of a quarter of a percentage point ”to avert a recession.”
U.S. stocks had already appeared to be headed for losses before the disappointing jobs report thudded onto Wall Street.
Several big technology companies turned in underwhelming profit reports, which continued a dispiriting run that began last week with results from Tesla and Alphabet.
Amazon fell 10% after reporting weaker revenue for the latest quarter than expected. The retail giant also gave a forecast for operating profit for the summer that fell short of analysts’ expectations.
Intel fell even more, 27.7%, after the chip company’s profit for the latest quarter fell well short of forecasts. It also suspended its dividend payment and said it expects to lose money in the third quarter, when analysts were expecting a profit.
Apple was holding a bit steadier, up 0.7%, after reporting better profit and revenue than expected.
Apple and a handful of other Big Tech stocks known as the “ Magnificent Seven ” have been the main reasons the S&P 500 has set dozens of records this year, in part on the frenzy around artificial-intelligence technology. But their momentum turned last month on worries investors had taken their prices too high and expectations for their profit gains had grown too difficult to meet.
Helpfully for Wall Street, other areas of the stock market that had been beaten down by high interest rates were rebounding at the same time, particularly smaller companies. But they tumbled too on Friday on worries that a fragile economy could undercut their profits.
The Russell 2000 index of smaller stocks dropped 3.7%, more than the rest of the market.
In the bond market, Treasury yields fell sharply as traders raised their expectations for how deeply the Federal Reserve would cut interest rates at its next meeting in September. The yield on the 10-year Treasury fell to 3.85% from 3.98% late Thursday and from 4.70% in April.
Amid all the fear, some voices on Wall Street were still advising caution.
“While worries of a policy mistake are rising, one negative miss shouldn’t lead to overreaction,” according to Lara Castleton, U.S. head of portfolio construction and strategy at Janus Henderson Investors.
She points out that the U.S. economy is still growing, and inflation is still coming down. The S&P 500, meanwhile, isn’t far off its record set two weeks ago. “Equities selling off should be seen as a normal reaction, especially considering the high valuations in many pockets of the market. It’s a good reminder for investors to focus on the earnings of companies going forward.”
In stock markets abroad, Japan’s Nikkei 225 dropped 5.8%, back to where it was trading in January before it surged to an all-time high last month. Japanese stocks have been struggling after the Bank of Japan raised its benchmark interest rate on Wednesday. That pushed the value of the Japanese yen higher against the U.S. dollar, potentially hurting profits for exporters and deflating a boom in tourism.
Chinese stocks extended losses this week as investors registered disappointment with the government’s latest efforts to spur growth through various piecemeal measures, instead of hoped-for infusions of broader stimulus.
Stock indexes also fell across much of Europe.
The nerve-wracking week for markets has come even as central banks in Japan, the United States and England acted pretty much as expected. Japan raised its benchmark rate, the Fed stood pat and the Bank of England lowered its key rate for the first time in more than four years.
Commodity prices have also had a rough ride, with oil prices surging after the killings of leaders of Hamas and Hezbollah that fueled fears conflict in the Middle East might escalate into a wider war. But prices fell back Thursday and Friday on worries about the economy.
AP Business Writers Matt Ott and Elaine Kurtenbach contributed.