The Dow Jones Industrial Average (DJIA) fell sharply on Friday, dropping nearly 500 points at its session low after the US Nonfarm Payrolls (NFP) report revealed weaker-than-expected hiring. The data bolstered expectations for a Federal Reserve rate cut at its September 17 meeting.
The Labor Department reported that the US economy added just 22,000 jobs in August, well below the 75,000 consensus. July’s figure was revised slightly higher to 79,000, but the latest miss reinforced market bets on Fed easing. Traders are now fully pricing in a 25-basis-point cut, with a 10% chance of a larger 50-basis-point move.
Rate cut optimism tempered by recession fears
While softer labor data supports expectations of Fed action, the scale of the slowdown has sparked renewed fears of a potential recession. The Dow, which briefly touched an intraday record high earlier in the week, reversed course and erased Thursday’s gains, leaving the index in negative territory for the week.
Eyes on upcoming inflation and sentiment data
Attention now shifts to next week’s economic releases, including the Consumer Price Index (CPI) on Thursday and the University of Michigan’s Consumer Sentiment and Inflation Expectations surveys on Friday. Headline CPI is expected to show a modest uptick, while sentiment is projected to recover after recent weakness.
