Wall Street: US stocks plummet, woeful jobs report and tech earnings spark recession fears

US stocks tumble on dismal jobs data

US stock markets closed sharply lower on Friday, driven by a weaker-than-expected jobs report that heightened concerns over recession and disappointing tech earnings. Non-farm payrolls increased by just 114,000 in July, missing forecasts of 175,000, while the unemployment rate rose to 4.3% from 4.1% prior, the highest since October 2021. For the week, the Nasdaq dived 3.4%, the S&P 500 fell 2.1%, and the Dow lost 852 points (-2.1%).

Tech giants under pressure

• Amazon tumbled 8.8% after missing revenue forecasts and issuing weak guidance for the third quarter
• Intel plummeted 26.1% on poor quarterly results
• Microchip Technology declined 10.6%
• ASML fell 8.41%
• Super Micro Computer dropped 7.08%
• Apple bucked the trend as it closed 0.7% higher at $219.86, after it beat earnings expectations despite a dip in iPhone revenue.

The Q2 2024 earnings season continues this week with reports scheduled from companies, including Caterpillar, Uber, Walt Disney, and Super Micro Computer.

ISM services PMI

Date: Tuesday, 6 August at 12.00am AEST

In June, the forward-looking ISM Services Purchasing Managers' Index (PMI) dived to 48.8 from 53.8 previously, marking its sharpest contraction since COVID-19. Across the sub-indices, Business Activity, New Orders, and Employment all declined.

For July, the market anticipates a rebound to 51, signalling a return to expansionary territory, which would help alleviate slowdown fears. However, a weaker number would indicate a deeper contraction in the services sector, further inflaming recession concerns.

Interest rate expectations

Ahead of the data, the US interest rate market is priced for 42 basis points (bp) of Fed rate cuts for September, with a cumulative total of 115 bp of rate cuts before year-end. If this plays out as current pricing suggests, we could see two 50 bp cuts and one 25 bp Fed rate cut before year-end.

ISM Service PMI chart

Nasdaq 100 technical analysis

In our Wall Street update from 15 July here, we noted the formation of a weekly "loss-of-momentum" candle. We said that the formation of a "loss-of-momentum" candle was a warning sign awaiting a trigger to indicate that a correction was underway. In this case, we mentioned the trigger would be downside follow-through below 20,000.

The falls have accelerated since then. Friday night's sell-off took the Nasdaq 100 below important support at 18,600, coming from the October 14,058 low. This has damaged the uptrend and opened the way for a deeper decline towards the 200-day moving average at 17,643.

To negate the downside risks, the Nasdaq 100 would need to see a sustained close back above 19,000. We would also point out that at this stage, there is no clear evidence of downside capitulation needed to indicate that a possible tradable low is in place.

Nasdaq 100 cash daily chart

S&P 500 technical analysis

The S&P 500’s decline last week saw it finish the week below important support at 5400, coming from the October 4103 low. The sell-off has caused significant technical damage to the uptrend and warns that a deeper pullback is underway to the 5250/5200 range.

To negate the downside risks, the S&P 500 cash would need to see a sustained close back above 5500. Like the Nasdaq 100, we would also point out that at this stage, there is no clear evidence of downside capitulation needed to indicate that a possible tradable low is in place.

S&P 500 daily chart

• _{Source: TradingView. The figures stated are as of 5 August 2024. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}