London, UK - The UK stock market experienced a sharp decline on Friday, following a disappointing US jobs report for July, which fuelled concerns about a potential recession.
The Dow Jones Industrial Average slumped by 1.3%, shedding 528 points, while the S&P 500 dropped by 1.5%. The tech-heavy Nasdaq Composite took an even bigger hit, falling by 2.2%.
The weak jobs figures, released by the US Labor Department, showed that employment growth slowed significantly in July, adding just 114,000 new jobs. This represented a significant decline from June's figure of 179,000 and fell short of economists' predictions of 185,000.
The unemployment rate also climbed to 4.3%, its highest level since October 2021.
These figures sparked concerns about the health of the US economy, casting a shadow over the global markets.
Tech giants were particularly hard hit, with Amazon taking a 9% dive after its second-quarter revenue fell short of analysts' expectations, and its forecast for the future was deemed disappointing.
Intel plummeted by a staggering 26% after announcing weak guidance and planned layoffs.
Even Apple, despite beating earnings expectations in its fiscal third quarter, saw its shares slide, as investors reacted negatively to the broader tech sector downturn following the weak jobs figures.
Nvidia also experienced a 4.5% decline, following a 6% loss on Thursday.
The negative sentiment extended to companies vulnerable to a recession, with Bank of America losing 3% and Caterpillar shares also dropping.
The 10-year Treasury yield fell to its lowest level since February, as investors sought the safety of bonds amidst the economic uncertainty.
The pullback on Friday added to Thursday's significant sell-off, which saw the Dow and S&P 500 each fall over 1% and the Nasdaq decline by 2.3%. This slump reverberated globally, with the Japanese Nikkei index losing 5.8% overnight.
The volatility of the week stems from the Federal Reserve's mixed messages. While the Fed hinted at a potential rate cut in September, it ultimately opted to maintain interest rates at their current levels.
However, the weak jobs figures have led many investors to question whether the Fed's decision to hold off on rate cuts may have been a mistake.
Quincy Krosby, chief global strategist at LPL Financial, commented that the market is now "wondering if the Fed is too late in transitioning monetary policy."
The market's reaction to the US jobs report highlights the fragility of the global economy and the growing concerns over a potential recession. Investors are now anxiously awaiting the Fed's next move, hoping for clarity on its approach to combating inflation and supporting economic growth.