Wall Street closed lower on Friday, pulled down by energy and financial stocks. Investors priced in signs of a sharp slowdown in August job growth against optimism that the Fed may move toward cutting interest rates soon. All three benchmark indexes closed in the red.
The Dow Jones Industrial Average (DJI) fell 0.5%, or 220.43 points, to close at 45,400.86. Twenty components of the 30-stock index ended in negative territory, while 10 ended in positive territory.
The tech-heavy Nasdaq Composite slid 7.31 points, remaining virtually unchanged to close at 21,700.39.
The S&P 500 lost 20.58 points, or 0.3%, to close at 6,481.50. Five of the 11 broad sectors of the benchmark index closed in the red. The Energy Select Sector SPDR (XLE), the Financials Select Sector SPDR (XLF) and the Industrials Select Sector SPDR (XLI) declined 1.9%, 1.8% and 0.4%, respectively, while the Real Estate Select Sector SPDR (XLRE) advanced 1%.
The fear gauge CBOE Volatility Index (VIX) decreased 0.8% to 15.18. A total of 16.95 billion shares were traded on Friday, higher than the last 20-session average of 16.05 billion. Advancers outnumbered decliners by a 1.87-to-1 ratio on the NYSE and by 1.42-to-1 on the Nasdaq.
On Friday, Wall Street was dominated by a profoundly soft August jobs report from the Labor Bureau that revealed that the U.S. economy added just 22,000 jobs, well beneath consensus expectations of around 80,000, and included downward revisions to previous months. The number for July, however, was revised to 79,000 jobs from the previously reported 73,000. This data triggered concerns about the labor market’s strength and economic resilience, and amplified expectations that the Fed may move to cut interest rates, possibly as early as mid-September, with a potential 25 bps cut now highly anticipated. In fact, murmurs of a 50-bps cut are also making the rounds.
The markets opened on a hopeful note on Friday with rate-cut expectations lifting sentiment, but equity gains quickly reversed. Bond markets responded decisively, with yields tumbling, especially the benchmark 10-year Treasury, which underscored the rush to safety and reinforced the prospect of imminent policy easing. Financial stocks were among the worst hit.
Consequently, shares of Wells Fargo & Company WFC and JPMorgan Chase & Co. JPM fell 3.5% and 3.1%, respectively. WFC currently carries a Zacks Rank #3 (Hold), while JPM boasts a Zacks Rank of (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
