Dow attempts tepid snap back after jobs report, but Nasdaq extends rout

On Thursday, the Dow ended with a loss of 807.77 points, or 2.8%, at 28,292.73, after dropping more than 1,000 points at its session low. The S&P 500 closed 125.78 points lower, down 3.5%, at 3,455.06. The Nasdaq Composite tumbled 598.34 points, or 5%, to end at 11,458.10. The declines marked the biggest one-day drops for all three indexes since June.

The fall came a day after the S&P 500 claimed its 22nd record close of the year, while the tech-heavy Nasdaq Composite arrived at its 43rd such all-time high and the Dow topped the 29,000 level for the first time since February. Thursday’s fall snapped a four-day win streak for the Nasdaq and a 10-day run of gains for the S&P 500’s tech sector.

In One Chart:Tech stocks and the rest of the market are both very expensive — but for very different reasons

What’s driving the market?

Investors early Friday were attempting to process a jobs report that was better-than-estimated but still reflective of a slowdown in employment, against the backdrop of the worst single-day decline since June produced on Thursday.

See:‘What’s concerning is that the pace of jobs growth is slowing down’ — economists react to August jobs report

Data from the Labor Department showed that the economy regained 1.4 million jobs in August and the unemployment rate fell to 8.4% from 10.2%. Economists polled by MarketWatch had predicted an increase of 1.2 million jobs.

Mike Loewengart, managing director investment strategy at E-Trade Financial
ETFC,
-0.07%,
said that investors could be in store for more turbulence after Thursday’s unsettling action.

“It’s been a while since we’ve been in the throes of the type of volatility that defined the market earlier this year, so investors may have some post-traumatic stress after yesterday’s landslide,” he wrote in emailed comments on Friday.

“For some perspective, September ushers in a historically volatile period for the market, and has a particularly bearish reputation,” he wrote. “Certainly, wide price swings are never comfortable, but investors should keep in mind that periods of volatility like this are not uncommon, especially on the heels of an epic rally, and should be taken in stride,” Loewengart said.

Some investment bulls believe that Thursday’s downturn wasn’t indicative of a broader unraveling of the overall upbeat momentum for equities.

Peter Cardillo, chief market economist at Spartan Capital Securities, said “we don’t think yesterdays plunge will turn into meaningful correction.”

“In other words, yesterdays decline is likely to be short lived as rotation maybe unfolding,” he said.

That said, some market player see Thursday’s moves as just the start of a purge of excess on Wall Street after equities surged to records following coronavirus-induced lows in late March.

“Diminishing breadth, the weakest seasonal period of the year (even for election years), over extended rallies in specific mega-cap names, and an approaching presidential election that brings great uncertainty are all likely reasons for yesterday’s plunge in the market,” wrote Jeff deGraaf, founder of Renaissance Macro, in a Friday research note.

Which stocks are in focus?

• Apple Inc.
  AAPL,
  -5.12%
  shares traded 3.3% lower after an 8% tumble for the company’s worst day since March 16, when shares plunged 12.9%.

• Athletic company Under Armour Inc.
  UA,
  -0.48%
  UAA,
  -0.28%
  said Friday it will close all of its UA Brand House and UA Factory House retail locations in the U.S. for Thanksgiving on Nov. 26., as a way to thank workers for their efforts during the pandemic. Under Armour’s class of shares were modestly higher, up 0.5% for Class C and 0.8% for Class A.

• Shares of Tesla Inc.
  TSLA,
  -4.11%
  fell 1.8% Friday, as the electric-vehicle makers attempts to avoid a fourth straight decline.