By Chibuike Oguh
NEW YORK (Reuters) -U.S. stocks fell on Friday, weighed down by a jobs report that showed a continued labor market slowdown but left traders uncertain about how far the Federal Reserve will go in cutting interest rates.
All three main indexes were lower, with the 11 sectors of the benchmark S&P 500 losing ground led by declines in communication services, consumer discretionary and technology equities.
The S&P 500 and the Dow had their biggest weekly drop since March 2023, with the Nasdaq registering its biggest weekly drop since January 2022.
U.S. Labor Department data showed U.S. employers added 142,000 jobs in August, shy of analyst expectations, while jobs growth for July was revised down to 89,000, also below estimates.
The report means Federal Reserve chair Jerome Powell must cut rates later this month, but also suggests he may be too late for the economy to achieve a soft landing, said Lou Basenese, president and chief market strategist at MDB Capital in New York.
"If we start seeing layoffs in the next month or two, it's going to suggest his timing was too late. Stocks are going to go down until next week when the Fed makes it definitive that they're cutting, which could put pressure on them to do 50 basis points versus 25 bps. I think 25 bps is all but guaranteed," Basenese said.
Fed Governor Christopher Waller said on Friday "the time has come" for the U.S. central bank to begin a series of interest rate cuts, adding he is open-minded about the size and pace.
Traders' bets for a 25-basis point rate cut in September stood at 73%, according to the CME Group's (NASDAQ:CME) FedWatch Tool, while those for a 50-bps reduction in rates were at 27%, down from a brief rise to 51% after the report.
"I still think the Fed is going to move 25 basis points," said Tony Roth, chief investment officer at Wilmington Trust in Radnor, Pennsylvania. "I don't think that the Fed is really ready at this point to push the panic button."
The Dow Jones Industrial Average fell 410.34 points, or 1.01%, to 40,345.41, the S&P 500 lost 94.99 points, or 1.73%, to 5,408.42 and the Nasdaq Composite lost 436.83 points, or 2.55%, to 16,690.83.
Losses in leading megacap growth stocks dragged the indexes, including the so-called Magnificent Seven: Nvidia fell 4%, Tesla (O:TSLA) slumped 8.4%, Alphabet (NASDAQ:GOOGL) lost 4%, Amazon (NASDAQ:AMZN) shed 3.7%, Meta declined 3.2%, Microsoft (NASDAQ:MSFT) dropped 1.6%, and Apple (NASDAQ:AAPL) weakened 0.70%.
Broadcom (NASDAQ:AVGO) sank 10.4% after the chipmaker forecast fourth-quarter revenue slightly below estimates, hurt by sluggish spending in its broadband segment.
Other chip stocks were down. Marvell Technology fell 5.3% and Advanced Micro Devices (NASDAQ:AMD) ended down 3.7%. The Philadelphia SE Semiconductor index finished lower by 4.5%. The semiconductor index logged its biggest weekly drop since March 2020.
Super Micro Computer dropped 6.8%. J.P. Morgan analysts had downgraded AI server maker's shares to "neutral" from "overweight".
Declining issues outnumbered advancers by a 3.08-to-1 ratio on the NYSE. On the Nasdaq, 1,006 stocks rose while 3,183 fell as declining issues outnumbered advancers by a 3.16-to-1 ratio.
Total volume across U.S. exchanges was about 11.8 billion shares, up from a 20-day moving average of 10.7 billion shares.