By Chuck Mikolajczak
NEW YORK (Reuters) -U.S. stocks tumbled for a second straight session on Friday, with the Nasdaq Composite on pace to confirm a fall into correction territory after a soft jobs report stoked fears of an oncoming recession.
The Labor Department said nonfarm payrolls increased by 114,000 jobs last month, well short of the 175,000 of economists polled by Reuters, and the at least 200,000 that economists believe are needed to keep up with population growth. The unemployment rate jumped up to 4.3%, near a three-year high.
The data added to concerns the economy was slowing more rapidly than anticipated and the Federal Reserve had erred by keeping rates steady at its policy meeting that concluded on Wednesday.
Expectations for rate cut of 50 basis points (bps) at the Fed's September meeting jumped to 69.5% from 22% in the prior session, according to CME's FedWatch Tool.
"Obviously the jobs number is the big headline, but we seem to have officially entered at least a rational world where bad economic news is read as bad rather than bad economic news is read as good," said Lamar Villere, portfolio manager at Villere & Co. in New Orleans.
"The Fed is going to cut and we're all sort of adjusted to that, that is sort of established. Now it's more like hey, did they wait too long? Do we have a recession on our hands?"
The weak jobs data also triggered what is known as the "Sahm Rule," seen by many as a historically accurate recession indicator.
The Dow Jones Industrial Average fell 910.06 points, or 2.26%, to 39,437.91, the S&P 500 lost 130.49 points, or 2.40%, to 5,316.19 and the Nasdaq Composite lost 481.00 points, or 2.80%, to 16,713.15.
Adding to the downward pressure was a tumble of nearly 10%% in Amazon and a plunge of more than 25% in Intel after their quarterly results and disappointing forecasts.
The declines pushed the Nasdaq Composite down more than 10% from its July closing high to put it on track to confirm it is in a correction after concerns grew about expensive valuations in a weakening economy.
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 small cap Russell 2000 index slumped about 4% to hit a nearly one-month low and was set for its biggest two-day slide since June 2022.
Chip stocks also continued their recent slide, with the Philadelphia SE Semiconductor Index hit a three-month low, poised for its biggest two-day slide since March 2020.
Among the few bright spots, Apple rose about 2% after posting better-than-expected third-quarter iPhone sales and forecasting more gains, betting on AI to attract buyers.
Of the 11 major S&P 500 sectors, only consumer staples were higher, with the Consumer Discretionary sector leading declines as Amazon weighed heavily, on pace for its biggest two-day drop since June 2022.
Wall Street's "fear gauge" breached the long-term average level of 20 points to touch 29.66 its highest mark since last March 2023.
Among other movers, Snap plummeted about 25% after forecasting current-quarter results below expectations.
Declining issues outnumbered advancers by a 3.5-to-1 ratio on the NYSE, and by a 4.954-to-1 ratio on the Nasdaq.
The S&P 500 posted 58 new 52-week highs and 15 new lows, while the Nasdaq Composite recorded 32 new highs and 268 new lows.
(Reporting by Chuck Mikolajczak, additional reporting by Caroline Valetkevitch; Editing by David Gregorio)
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