Shares of industrial and transportation companies slid amid mounting fears of an impending recession.
Job growth slowed sharply in July and the unemployment rate rose to its highest level since 2021, adding to evidence that a labor market whose strength is fading could actually be on its way to weakness.
The unemployment rate jumped to 4.3%, the clearest indication yet that an economic slowdown could mushroom into a recession.
"This is further proof that the economy is slowing, which has many worried the Fed is now firmly behind the eight ball," said Ryan Detrick senior strategist at financial advisory The Carson Group.
"It is becoming clear that the Fed should be more worried about the economy than inflation, which is increasing the chances of a 50 basis point cut in September. Moves in the Treasury and stock markets are indicative of a "growth scare," the sudden realization that the economy may already be in the midst of recession, said Quincy Krosby, chief global strategist at brokerage LPL Financial.
The Fed may be jolted into cutting rates by a more drastic 50 basis points at its September meeting, or making an intervention before the meeting, strategists said. In projections released at the Federal Reserve's June meeting, when the unemployment rate stood at 4%, only three of 19 officials estimated the unemployment rate would end the year above 4.1%, an indication that the Fed, like the stock market, was caught off guard by the latest round of data.
Separately, factory orders fell 3.3% in June, according to the latest tally. Sales of new cars and trucks in the U.S. rebounded in July after auto dealers fixed their computer systems following a major cyberattack and were able to completed thousands of delayed purchases.
Write to Rob Curran at rob.curran@dowjones.com
(END) Dow Jones Newswires
08-02-24 1733ET
