[New York Stock Market] New York Stocks Fall Across the Board on Disappointing August Employment Data Amid Recession Concerns

Fed Official's Remarks on Possible Big Cut Raise Recession Concerns
Bubble Debate Causes Sharp Decline in Major Tech Stocks
2-Year Treasury Yield Drops to 3.67%

The August nonfarm payrolls data fell short of expectations, causing the New York stock market to decline across the board on the 6th (local time). Comments from a U.S. Federal Reserve (Fed) official suggesting the possibility of a big cut (a 0.5 percentage point interest rate cut) heightened concerns about the U.S. economic outlook, shaking the market.

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On that day, the Dow Jones Industrial Average closed at 40,345.41, down 410.34 points (-1.01%) from the previous day. The Standard & Poor's (S&P) 500 index fell 94.99 points (-1.73%) to 5,408.42, and the tech-heavy Nasdaq index dropped 436.83 points (-2.55%) to close at 16,690.83. On a weekly basis, the S&P 500 index fell 4.3%, marking its worst week in one year and six months since March 2023.

The stock market's broad decline was due to the morning's employment data release falling short of expectations, increasing fears of an economic recession.

Earlier, the U.S. Department of Labor reported that nonfarm payrolls increased by 142,000 in August compared to the previous month. Although this was higher than July's increase of 89,000, it was below the expert forecast of 161,000 compiled by Dow Jones.

However, the unemployment rate met market expectations. The August unemployment rate fell to 4.2% from 4.3% in July. While the employment increase was weaker than expected, the unemployment rate declined, showing mixed signals in the employment data. Nevertheless, the market widened its losses due to concerns about a possible recession.

Large tech stocks, which have been embroiled in overvaluation controversies, fell sharply. Nvidia (-4.09%), Alphabet (-4.02%), and Amazon (-3.65%) all dropped significantly, while Microsoft (-1.64%) and Apple (-0.70%) also declined. Broadcom, which announced earnings forecasts below market expectations the previous day, plunged 10.36%.

Emily Rolland, Chief Investment Strategist at John Hancock Investment Management, analyzed, "The anxiety triggered by economic concerns was the driving force behind the market weakness on this day."

She added, "The market is wavering between whether bad news for the economy is bad news for the market, or whether bad news is good news for the market (due to interest rate cuts). This anxiety could raise hopes that the Fed might act more aggressively than the market expects."

Comments from a Fed official anticipating a big cut also influenced the stock market. Fed Governor Christopher Waller said, "The economy is growing solidly, and the outlook for continued growth is good," but added, "If the data suggest a greater need for a larger rate cut to increase the chances of a soft landing, I would support that." Since Waller has been known as a proponent of tight monetary policy, the market interpreted his stance as a sign that the pace of rate cuts might accelerate, possibly reflecting concerns about a recession.

U.S. Treasury yields reacted to the Fed's moves by falling across the board. The yield on the 2-year U.S. Treasury note dropped 8 basis points (1bp = 0.01 percentage points) to 3.67% near the close of the New York stock market, compared to the same time the previous day. The 10-year U.S. Treasury yield fell by only 1 basis point to 3.72% near the market close.