Stocks plunge as weak jobs report, tech woes rattle Wall Street
Stocks plunged Monday morning as mounting concerns about the strength of the U.S. economy and the outlook for microchip production shook Wall Street.
The Dow Jones Industrial Average opened with a loss of 1,100 points Monday, plunging 2.8 percent after the opening bell. Dow futures tumbled more than 1,200 points before the market opened Monday.
The tech-heavy Nasdaq composite plunged 6.2 percent and the S&P 500 index sank 4.2 percent after the market opened.
“The U.S. is the locomotive of the global economic train and increasing concern about a slowdown, or possible recession, has markets around the world in turmoil,” wrote Greg McBride, chief financial analyst at Bankrate, in a Monday analysis.
Global markets have been in recoil since Friday after the federal jobs report for July came in far weaker than expected.
The U.S. added just 114,000 jobs in July and the jobless rate rose to 4.3 percent, according to the Labor Department, falling short of the 175,000 new jobs and 4.1 percent unemployment rate projected by economists.
The July jobs report also followed a string of lackluster second-quarter earnings reports from major companies, including chipmaker Intel, which announced plans to slash its workforce.
And Berkshire Hathaway chairman Warren Buffett slashed its holdings of Apple stock by nearly half, triggering deeper alarm about the outlook for tech companies.
“While Friday’s employment report was disappointing, it wasn’t the only worrisome economic indicator, only the latest,” McBride said.
“Couple economic concerns with the cacophony of earnings disappointments and weak corporate outlooks, global unrest, and currency gyrations, and you have the recipe for sudden volatility.”
The weak July jobs numbers fueled concern among investors and some policymakers that the Federal Reserve — which declined to cut interest rates Wednesday — should have already done so after months of cooling inflation.
“Fed Chair [Jerome] Powell made a serious mistake not cutting interest rates,” Sen. Elizabeth Warren (D-Mass.) said in a Friday post on X.
“He’s been warned over and over again that waiting too long risks driving the economy into a ditch.”
Top U.S. economic policymakers sought to assure the public Monday that the market selloff was no reason for broader alarm about an economic downturn.
Austan Goolsbee, president of the Federal Reserve Bank of Chicago, said the U.S. does not appear to be in a recession, but acknowledged that the Fed’s current interest rate range may be too high.
"Let's not overreact to one month's number, but if thats a sign of something that's happening longer term, then we should respond to what those forces are,” Goolsbee told CNBC’s “Squawk Box” Monday morning, referring to the July jobs report.
"We're very restrictive, and you'd only want to be restrictive like that if you think the economy is overheating."
McBride also urged caution amid the market volatility.
"Individual investors should be reminded that market volatility is common and a 10% pullback tends to happen, on average, every 12 months or so," he said.
The selloff comes roughly three months before the election, in which the economy is likely to play a significant role.
Former President Trump seized on the news Sunday night, blaming President Biden and Vice President Harris.
Harris, who wrapped up the Democratic presidential nomination last week, was already facing a challenge in selling the administration's economic record. Despite three years of record-breaking job gains and sturdy economic growth, high inflation strained many U.S. households — and their views of Biden's handling of the economy.
Updated at 9:39 a.m.