Stock market today: S&P 500, Nasdaq, Dow make a U-turn lower after jobs report shows dramatic slowdown

US stocks reversed sharply Friday following a much weaker-than-expected August jobs report, which added only 22,000 jobs and revealed the first labor market shrinkage since 2020, solidifying investor certainty for an imminent Federal Reserve rate cut in September, with 100% odds priced in and growing bets for a 50-basis-point reduction. This data sent Treasury yields lower and propelled gold to record highs. Separately, Broadcom surged over 10% on an upbeat AI outlook and a reported OpenAI chip deal, while Tesla gained on a proposed $1 trillion compensation plan for Elon Musk; conversely, Lululemon slumped after a weak outlook, and President Trump continued his criticism of Fed Chair Powell following the jobs data.

Analysis

A significantly weaker-than-expected August jobs report has cemented market expectations for an imminent Federal Reserve rate cut, yet triggered a risk-off sentiment in equity markets. The US economy added only 22,000 jobs, far below the 75,000 forecast, and downward revisions revealed June's employment figures were negative for the first time since 2020. Consequently, traders are now pricing in a 100% probability of a rate cut at the September meeting, with bets on a 50-basis-point reduction increasing. This dovish shift sent Treasury yields lower, with the 10-year yield (^TNX) falling to 4.07%, and propelled gold futures (GC=F) to a record high above $3,650 per ounce. Despite an initial rally, major indices reversed course, with the S&P 500 falling 0.6% from its all-time high, suggesting investor anxiety about the severity of the economic slowdown may be outweighing the appeal of looser monetary policy. The technology sector exhibited significant divergence: Broadcom (AVGO) shares surged over 10% on a strong AI outlook and a reported $10 billion deal with OpenAI, adding nearly $140 billion in market value and pressuring rivals Nvidia (NVDA) and AMD (AMD), which fell 3.6% and 6.8% respectively. Meanwhile, Tesla (TSLA) shares rose on a proposed $1 trillion CEO incentive plan, while Lululemon (LULU) stock plunged after cutting its guidance, underscoring a market increasingly focused on company-specific execution amid macro uncertainty and political pressures on the Fed.

Key Decisions for Investors

• Given the confirmed labor market slowdown and 100% pricing for a September rate cut, investors should consider increasing exposure to rate-sensitive assets like gold, which is also benefiting from concerns over Fed independence.
• The AI sector is showing signs of competitive recalibration; while the overall market for AI chips is growing, Broadcom's ascent at the expense of Nvidia's and AMD's stock prices warrants a review of single-name concentration risk in AI-themed portfolios.
• The market's negative reversal despite dovish Fed signals indicates potential fragility and profit-taking at all-time highs, suggesting a cautious approach to broad index exposure and a heightened focus on stock-specific fundamentals.
• Investors should monitor increasing political pressure on the Federal Reserve, as President Trump's continued criticism and personnel changes could introduce further volatility and strengthen the case for safe-haven assets.