S&P 500, Dow, Nasdaq post largest weekly percentage loss in years after weak jobs data

U.S. stocks closed lower on Friday, forcing all three major indexes to register the largest weekly percentage losses in years, after a weak jobs report kept investors questioning how much the Federal Reserve would lower interest rates in coming weeks.

For the week, the S&P 500 lost 4.25% and the Dow fell 2.93%. Both were their largest weekly percentage losses since March 2023. The Nasdaq declined 5.77% for the week, which was the biggest weekly percentage loss since January 2022.

U.S. employers added a disappointing 142,000 jobs in August, below Bloomberg's consensus estimate of 163,000 jobs. July was revised down to 89,000, also below estimates. The unemployment rate edged down to 4.2% from July's 4.3%.

Slowing jobs growth confirms that the economy is weakening, which almost ensures the Fed will cut rates when it concludes its policy meeting on September 18. However, it also may suggest the Fed's rate cuts 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," he said.

Bond markets looked forward to rate cuts, with the two-year Treasury yield dropping to the lowest level since 2022.

How big will the Fed's rate cut be?

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.

The CME's Fed watch tool, which calculates the odds of a Fed move, shows a 71% chance of a quarter-point cut at the Fed's next meeting. Chances for a half-point reduction stood at 29%.

In 2022 and 2023, the Fed hiked its key rate from near zero to a 23-high of 5.25% to 5.5% to fight inflation, and the rate has remained there since.

Corporate news weighs on stocks, too

Broadcom sank 10% to $137.00 after the chipmaker forecast fourth-quarter revenue slightly below estimates, hurt by sluggish spending in its broadband segment.

Super Micro Computer lost 6.87%, dropping to $386.46 after J.P. Morgan analysts downgraded the AI server maker's shares to neutral from overweight.

(Reuters contributed to this report.)

Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.