Nasdaq set to confirm correction as recession fears mount; Amazon, Intel slide

By Ankika Biswas and Shubham Batra

(Reuters) -The Nasdaq Composite was on track to fall into a correction in a Wall Street battering after Friday's weak jobs numbers deepened worries of a slowdown in the U.S. economy, while Amazon and Intel's downbeat forecasts worsened investor sentiment.

The tech-laden index slumped over 10% from its July peak, putting it on track to confirm it is in a correction after concerns arose about pricey Big Tech valuations and a cooling economy.

"This isn't that unusual as we passed the economic torch from the perception of growth to needing government intervention with lower interest rates to stabilize the economy," said Tom Plumb, chief executive and portfolio manager at Plumb Funds.

"As we go through the fall and start to see some impact of the Fed taking actions (on rate cuts), we can see a recovery from current levels to well over 18,000 points by year-end."

At 11:51 a.m. the Dow Jones Industrial Average fell 833.37 points, or 2.07%, to 39,514.60, the S&P 500 lost 112.95 points, or 2.07%, to 5,333.73 and the Nasdaq Composite lost 409.46 points, or 2.38%, to 16,784.69.

The S&P 500 hit its lowest level since June 5. Both the benchmark index and the blue-chip Dow were on track for their biggest two-day slides in nearly two years.

The nonfarm payrolls report showed the U.S. job market slowed sharply last month, while a separate reading revealed new orders for U.S.-manufactured goods fell more than expected in June, deepening fears about the health of the economy sparked by Thursday's weak manufacturing data.

With fresh evidence of the labor market weakening, traders are now betting the U.S. Federal Reserve will deliver a half-percentage-point rate cut in September, versus the 25-bps cut expected before the data.

"Now the question isn't will they cut in September, but by how much. With the Sahm rule officially being triggered, both the talk of recession and criticism of the Fed will grow louder," said Jay Woods, chief global strategist, Freedom Capital Markets.

The Sahm rule is a historically accurate early indicator of recession.

The small-cap Russell 2000 index slumped 4% to hit a nearly one-month low and was set for its biggest two-day slide since June 2022.

Amazon.com fell 9% after it reported slowing online sales growth in the second quarter and said cautious consumers were seeking cheaper purchase options.

Intel tumbled 26% after forecasting third-quarter revenue below estimates and suspending its dividend, starting in the fourth quarter.

Other chip stocks were also set to extend Thursday's losses. Nvidia and Broadcom lost 2% each, while Micron Technology and Arm Holdings were down around 7% each.

The Philadelphia SE Semiconductor Index hit a three-month low, set for its biggest two-day slide since March 2020.

Bucking the negative trend in megacaps, Apple rose 2.3% after posting better-than-expected third-quarter iPhone sales and forecasting more gains, betting on AI to attract buyers.

Disquiet about the dominance of the "Magnificent Seven" group of stocks persists as earnings from most of the Big Tech companies have failed to enthuse investors, underlining worries about their valuations being inflated.

All the 11 S&P 500 sub-indexes slumped, with the Consumer Discretionary sector leading losses and on track for its biggest two-day drop since June 2022.

Major U.S. banks also fell for the second straight day on recession concerns, with the S&P 500 Financials and Banks indexes losing 3% and 4.7%, respectively.

Wall Street's "fear gauge" breached the long-term average level of 20 points to touch its highest mark since last March.

Among other movers, Snap lost 24.7% after forecasting current-quarter results below expectations.

Chevron Corp fell 3.5% after the oil giant missed estimates for second-quarter profit.

Declining issues outnumbered advancers by a 4.23-to-1 ratio on the NYSE, and by a 5.74-to-1 ratio on the Nasdaq.

The S&P 500 posted 57 new 52-week highs and 15 new lows, while the Nasdaq Composite recorded 27 new highs and 248 new lows.

(Reporting by Ankika Biswas, Shubham Batra and Medha Singh in Bengaluru; Editing by Shounak Dasgupta and Pooja Desai)