Wall Street drops sharply, led by the Nasdaq; Intel plummets.

Investor concerns were heightened by the non-farm payroll report, which showed job creation slowed to 114,000 last month.

Ignacio Teson•Friday, August 2, 2024•2 min read

Averages Drop Amid Economic Concerns and Doubts About AI’s Impact on Big Companies’ Earnings

Wall Street’s three major indices are sharply lower this Friday, led by the tech-heavy Nasdaq. The averages are falling due to economic concerns and growing doubts about the impact of artificial intelligence on the earnings of large companies.

The Dow Jones Industrial Average, which tracks 30 large corporations, is down 1.88% to 39,587.44 points, while the S&P 500, comprising 500 stocks, has fallen 1.90% to 5,342.99 points. The Nasdaq Composite, heavily weighted toward technology, has dropped 2.17% to 16,820.87 points.

Investor concerns were heightened by the non-farm payroll report, which showed job creation slowed to 114,000 last month, well below the expected 175,000. Additionally, the unemployment rate rose to 4.3% from June’s 4.1%.

SPX

These figures, combined with a weak manufacturing report released yesterday, have fueled fears in the markets that the U.S. economy might be nearing a recession after a period of high interest rates aimed at controlling inflation.

Federal Reserve Chairman Jerome Powell mentioned on Wednesday, following the central bank’s decision to keep interest rates unchanged, that the possibility of a rate cut was discussed and would be revisited in September.

However, investors are increasingly concerned that such a move may come too late to prevent a recession. This anxiety is compounded by doubts triggered by the recent quarterly earnings reports from major tech companies.

Intel’s stock leads the day’s losses, plunging 27.18% to $21.16 after its weak quarterly results prompted the company to announce a 15,000 job cut and suspend its dividend.

Amazon also took a significant hit (-9.89%), despite exceeding expectations in earnings and revenue. The company’s third-quarter revenue guidance came in mostly below analyst expectations.

The Nasdaq has now fallen more than 10% from its recent all-time high, signaling a market correction, which could be due to both overvaluation and a price adjustment in response to changing expectations.

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ABOUT THE AUTHOR See More

Ignacio Teson

Economist and Financial Analyst

Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.