Wall Street's main indexes eased from record highs on Friday after concerns about a slowdown in the world's largest economy outweighed optimism about interest-rate cuts from the U.S. Fed following a weaker-than-expected August jobs report.
Economically sensitive sectors led declines. Banks fell 2.2%, energy shed 1.7% and industrials lost 1%.
Data showed the U.S. economy created only 22,000 jobs last month compared to an estimate of 75,000 additions, confirming that labor market conditions were softening and making a stronger case for interest-rate cuts from the Federal Reserve in September.
Traders of futures tied to the Fed's policy rate added to bets that the U.S. central bank will trim rates in quick succession, starting this month, with a jumbo 50-basis-point reduction now on the table.
While a 25-bps rate cut later this month was a near certainty before the data, traders now also see a 16% chance of a larger 50-bps rate cut in September — a stark change from no such bets a month ago, CME's FedWatch Tool showed.
"This is more of a recessionary jobs report than not. It doesn't indicate that we're necessarily in a recession now, but it definitely is more in the negative column than it is in the positive column," said Kevin Gordon, senior investment strategist at Charles Schwab.
"If they're (the Fed) is cutting in response to a weakening labor market because it's getting away from them, that is initially not a bullish setup for the stock market."
The three major U.S. stock indexes had scaled fresh peaks early in the session, but the gains petered out.
At 11:26 a.m. EST, the Dow Jones Industrial Average fell 263.18 points, or 0.58%, the S&P 500 lost 35.79 points, or 0.55%, and the Nasdaq Composite shed 73.98 points, or 0.34%.
Broadcom was in a bright spot, surging 9.8% to a record high — lifting the Philadelphia SE Semiconductor index 0.5% — after the chip designer forecast fourth-quarter revenue above estimates and expected AI revenue growth to "improve significantly" in fiscal-year 2026.
Investors, unimpressed by Nvidia's quarterly results last week and concerned after the lofty valuations of AI-related firms briefly paused Wall Street's rally in August, were relieved after Broadcom's results.
On the other hand, Lululemon Athletica plunged 17.5% to a more than five-year low after the yogawear-maker slashed its annual profit forecast the second time in a row, dragging larger rival Nike down 1.1%.
Tesla rose up 2% after the EV-maker proposed an about $1-trillion compensation package for top boss Elon Musk, subject to meeting lofty performance targets.
Advancing issues outnumbered decliners by a 1.27-to-1 ratio on the NYSE and by a 1.18-to-1 ratio on the Nasdaq.
The S&P 500 posted 28 new 52-week highs and three new lows, while the Nasdaq Composite recorded 105 new highs and 66 new lows.