U.S. markets declined Friday, with all three major indexes on track to register weekly losses to cap off a choppy start to September trading as investors reckoned with the possibility of weakness in the technology sector and a softening economy in general.
Tech stocks were hit hard, with the Nasdaq composite index down more than 2 percent in the afternoon. This week’s rough ride for the semiconductor industry continued Friday, led by Broadcom, which plunged more than 8 percent. The company had issued a weaker-than-expected revenue forecast, fueling investor worries over waning demand for technology related to artificial intelligence.
Nvidia, Intel and Qualcomm were down more than 2 percent, and other big names in tech also declined, with Tesla stock losing over 6 percent and Alphabet falling over 3 percent.
The S&P 500 index moved 1.5 percent lower. The Dow Jones Industrial Average declined almost 1 percent.
Some investors are struggling to form a consensus regarding how to interpret recent economic data and the future path of interest rates, leading to short-term trading volatility, says analyst Michael Farr of Farr, Miller and Washington. Markets are experiencing a sort of “investor sentiment schizophrenia,” Farr said, with “wildly vacillating emotions around the transition in monetary policy magnified by political headlines.”
Tech investments typically entail a higher level of risk, and an expected shift to lower interest rates has many investors on edge, Farr said. “The fast, speculative trading money that chases and drives these [tech] stocks heads for the door and asks questions later.”
A weaker than expected August jobs reportcontributed to the negativity Friday, as evidence of a cooling labor market that stoked fears that the Federal Reserve has moved too slowly to cut interest rates. The VIX volatility index, dubbed Wall Street’s “fear gauge,” is up 90 percent year-to-date, according to MarketWatch.
“The labor market has slowed and slackened over the past three months, with job growth in the private sector outside of health care and social assistance falling to an unusually slow pace,” Julia Pollak, chief economist at ZipRecruiter, wrote in an email to The Washington Post on Friday. “The 3-month average gain has been just 39.1K, well below the pre-pandemic 2015-2019 average of 137K.”
In a Friday speech, Fed governor Christopher Waller said the central bank would probably end up cutting rates multiple times. But determining the pace will be “challenging,” he noted.
The three major U.S. indexes have experienced a difficult start to September, particularly the Nasdaq, which is down more than 5 percent since Aug. 30. Investors should brace for more turbulence amid mixed economic data and increased political uncertainty, according to Carol Schleif, chief investment officer at BMO Family Office. But it won’t last forever, she said.
“We do expect stock market volatility to remain elevated, and exceedingly data and headline dependent into and through the presidential election,” Schleif said Friday in comments emailed to The Post. “We remind investors that in a mere two months, much of that uncertainty will be settled and markets will be focusing on 2025 earnings, which we expect to be solid.”