Stocks experienced a sharp decline on Thursday, erasing the gains seen on Wednesday. The major indices all dropped, with the Nasdaq down 2.3% and the S&P 500 down 1.4%. The catalyst for this drop was not just earnings reports, but also weakening economic data. Construction spending was declining, leading to concerns about overall infrastructure spending, while a weaker than expected employment report for July added to the market volatility.
Economists had forecasted 176 thousand new jobs for July, but the actual number came in at just 114 thousand. The unemployment rate also rose unexpectedly from 4.1% to 4.3%. Despite some positive aspects like job growth in core sectors such as healthcare and construction, the overall weak jobs report had a negative impact on the market. Some big names in the tech industry, including Apple and Amazon, reported disappointing earnings, leading to significant drops in their stock prices. Intel also reported a decline in revenue, resulting in a 20% drop in after-hours trading.
However, there were some bright spots in the earnings reports, with Coinbase beating expectations and reporting increased trading volumes as regulatory burdens eased. In the oil sector, Exxon Mobil reported record production numbers, thanks to a recent acquisition, while Chevron’s earnings fell due to lower refining margins. The focus of the market has shifted from solely earnings to what they indicate about the overall economy. Surging bond prices and falling yields suggest investors are seeking safe havens amid concerns about a global economic slowdown.
The market sentiment seems to have shifted as investors are now viewing possible rate cuts as a sign of a slowing economy. Stronger economic data was previously seen as a negative, as it would delay potential rate cuts. The increased volatility in the market, with the VIX rising above 21, presents challenges for options traders but may also offer opportunities for stock buyers. It is important for investors to stick with their long-term objectives and investing plans, while keeping a close eye on how the market interprets the latest economic data and earnings reports.
