By Ankika Biswas and Shubham Batra
(Reuters) - The Nasdaq Composite was set to plunge into a correction on Friday, falling more than 10% from its July peak after weak employment numbers aggravated worries of a slowdown in the U.S. economy, while Amazon and Intel's downbeat forecasts dampened sentiment.
The S&P 500 hit its lowest level since July 11 and the Dow was on track for its biggest two-day percentage fall since early March 2023.
A Labor Department report showed nonfarm payrolls rose by 114,000 jobs in July, sharply lower than the 175,000 additions estimated by economists polled by Reuters. The unemployment rate ticked higher, to 4.3%, from 4.1% a month ago.
With fresh evidence of a weakening labor market, traders are now betting the U.S. Federal Reserve will deliver a big 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 (a recession gauge) 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.
At 9:55 a.m. ET, the Dow Jones Industrial Average was down 458.84 points, or 1.14%, at 39,889.13, the S&P 500 was down 82.67 points, or 1.52%, at 5,364.01, and the Nasdaq Composite was down 405.96 points, or 2.36%, at 16,788.19.
Amazon.com slumped 11.7% after the company reported slowing online sales growth in the second quarter and said cautious consumers were seeking cheaper purchase options.
Intel tumbled 26.7% 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 fell 4.4%, Broadcom lost 3.3%, Micron Technology shed 5.7% and Arm Holdings was down 6.3%.
The Philadelphia SE Semiconductor Index hit a three-month low, falling 4.5%.
Apple inched 2.3% higher as it posted better-than-expected third-quarter iPhone sales and forecast more gains, betting on AI to attract buyers.
Eight of the 11 S&P 500 sub-indexes fell, with the Consumer Discretionary sector leading the losses and on track for its biggest one-day drop since Sept. 13, 2022.
Other megacaps such as Microsoft and Alphabet shed around 2% each. Meta also dropped, losing 1.0% after soaring on Thursday after upbeat results.
Concerns about the dominance of the "Magnificent Seven" group of stocks persist as earnings from most of these Big Tech companies have failed to enthuse investors, underlining fears of their valuations being inflated.
Wall Street's "fear gauge" breached the long-term average level of 20 points to touch its highest mark since last October.
The Russell 2000 small-cap index was down 3.3%, hitting a three-week low, and was also set for its biggest two-day percentage drop since June 2022.
Among other movers, Snap lost 22.8% after forecasting current-quarter results below expectations.
Chevron Corp slipped 1.6% after the oil giant missed estimates for second-quarter profit, hurt by weak refining margins.
Declining issues outnumbered advancers for a 3.04-to-1 ratio on the NYSE, and by a 5.28-to-1 ratio on the Nasdaq.
The S&P index recorded 55 new 52-week highs and 11 new lows, while the Nasdaq recorded 22 new highs and 172 new lows.
(Reporting by Ankika Biswas, Shubham Batra and Medha Singh in Bengaluru; Editing by Shounak Dasgupta and Pooja Desai)
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