Stocks opened higher Friday as market participants cheered a bad-news-is-good-news jobs report. But the main indexes quickly turned lower once the reality of a slowing labor market settled in, with a mixed round of late-season earnings reports not helping to shift sentiment.
Ahead of the open, the Bureau of Labor Statistics said the U.S. added 22,000 in August, missing economists' estimate for 75,000 new positions. Figures for June were revised down by 27,000, from +14,000 to -13,000, while July job growth was upwardly revised by 6,000 (from 73,000 to 79,000 additions).
With these revisions, the U.S. added 21,000 fewer jobs in June and July than previously reported.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The unemployment rate, which is calculated from a separate survey, ticked up to 4.3% from 4.2%.
The August jobs report "was much weaker than expected and featured downward revisions as well, and that news is the cause of today's volatile action," says Argus Research. "The good news/bad news fight is between those who see the jobs report as guaranteeing lower interest rates and those who see the same report as an ominous sign of a slowing economy."
On the good news side, futures traders are now pricing in expectations that the Federal Reserve will lower interest rates by a quarter-percentage point at each of this year's three remaining meetings, according to CME Group FedWatch.
As for the bad news, Wells Fargo Investment Institute Senior Global Market Strategist Scott Wren says the data "syncs with our view that the labor market is likely to gradually decelerate in coming months/quarters and continue to look for the unemployment rate to move higher by the end of this year."
Wren and his colleagues expect the unemployment rate to hit 4.5% by year's end as the economy slows.
All eyes now turn to next week's economic calendar and Thursday's release of the August Consumer Price Index (CPI) – the last major inflation update ahead of the September Fed meeting.
Broadcom pops after earnings, while Lululemon drops
A relatively light earnings calendar saw plenty of fireworks. Broadcom (AVGO), for one, surged 9.4% – making it the best S&P 500 stock today.
The chipmaker reported higher-than-expected fiscal third-quarter earnings and revenue and gave upbeat fourth-quarter guidance.
Broadcom also said that it has secured $10 billion in orders for custom AI chips from a new customer, which The Wall Street Journal speculates is OpenAI.
"We view this as a thesis-confirming quarter that underscores rising demand for AI ASICs across existing customers as well as potential upside from new XPU programs ramping up into production," says William Blair analyst Sebastien Naji.
Naji adds that he expects revenue growth "to accelerate meaningfully" in the upcoming fiscal year, which will translate "into substantial earnings power."
At the other end of the S&P 500 was Lululemon Athletica (LULU), which plunged 18.6% after the athletic apparel maker reported lower-than-expected second-quarter revenue and gave weak full-year guidance.
"We are facing yet another shift today within the industry related to tariffs and the cost of doing business," said Lululemon CEO Calvin McDonald in the company's earnings call. "The increased rates and removal of the de minimis provision have played a large part in our guidance reduction for the year."
BofA Securities analyst Lorraine Hutchinson downgraded the consumer discretionary stock to Neutral (Hold) from Buy after earnings and slashed her price target to $210 from $300, "to reflect a lower sales outlook and margin pressure from tariffs and de minimis."
Tesla jumps after its board proposes a new pay plan for Elon Musk
In non-earnings news, Tesla (TSLA) shares jumped 3.6% after the electric vehicle maker's board of directors proposed a new incentive package for CEO Elon Musk.
According to a regulatory filing, Tesla's board outlined a new "super ambitious incentive package for a pioneering, ambitious and unique CEO" that could be worth nearly $1 trillion ($975 million if the company's share count remains, according to CNBC).
Musk will receive these shares if the company meets several milestones, including Tesla eventually reaching a market cap of $8.5 trillion (it's currently at $1.1 trillion), the company delivering 20 million EVs and having 1 million robotaxis in commercial operation.
"We believe that Elon's singular vision is vital to navigating this critical inflection point," the company wrote in its letter to shareholders. "Simply put, retaining and incentivizing Elon is fundamental to Tesla achieving these goals and becoming the most valuable company in history."
The new pay plan still requires shareholder approval. Tesla will host its annual meeting of shareholders on Thursday, November 6.
As for the main indexes, the Dow Jones Industrial Average closed down 0.5% to 45,400, the S&P 500 fell 0.3% to 6,481, and the Nasdaq Composite gave back 0.03% to 21,700.
Related content
- SPACs, SMRs and How to Invest in the Nuclear Insurgency
- If You'd Put $1,000 Into Google Stock 20 Years Ago, Here's What You'd Have Today
- Klarna IPO: Should You Buy KLAR Stock?
-
I'm want to give my 3 grandkids $5K each for Christmas.You're comfortably retired and want to give your grandkids a big Christmas check, but their parents are worried they might spend it all. We ask the pros for help.
-
If You're Not Doing Roth Conversions, You Need to Read ThisRoth conversions and other Roth strategies can be complex, but don't dismiss these tax planning tools outright. They could really work for you and your heirs.
-
Could Traditional Retirement Expectations Be Killing Us?A retirement psychologist makes the case: A fulfilling retirement begins with a blueprint for living, rather than simply the accumulation of a large nest egg.
-
I'm a Financial Planner: If You're Not Doing Roth Conversions, You Need to Read This
Roth conversions and other Roth strategies can be complex, but don't dismiss these tax planning tools outright. They could really work for you and your heirs.
-
Could Traditional Retirement Expectations Be Killing Us? A Retirement Psychologist Makes the Case
A retirement psychologist makes the case: A fulfilling retirement begins with a blueprint for living, rather than simply the accumulation of a large nest egg.
-
I'm a Financial Adviser: This Is How You Can Adapt to Social Security UncertaintyRather than letting the unknowns make you anxious, focus on building a flexible income strategy that can adapt to possible future Social Security changes.
-
I'm a Financial Planner for Millionaires: Here's How to Give Your Kids Cash Gifts Without Triggering IRS PaperworkMost people can gift large sums without paying tax or filing a return, especially by structuring gifts across two tax years or splitting gifts with a spouse.
-
'Boomer Candy' Investments Might Seem Sweet, But They Can Have a Sour AftertasteProducts such as index annuities, structured notes and buffered ETFs might seem appealing, but sometimes they can rob you of flexibility and trap your capital.
-
AI Stocks Lead Nasdaq's 398-Point Nosedive: Stock Market TodayThe major stock market indexes do not yet reflect the bullish tendencies of sector rotation and broadening participation.
-
Got $100 to Gamble? These Penny Stocks Could Be Worth the RideVolatile penny stocks are high-risk plays with potentially high rewards. If you have $100 you can afford to lose, these three names are worth a look.
-
Quick Question: Are You Planning for a 20-Year Retirement or a 30-Year Retirement?You probably should be planning for a much longer retirement than you are. To avoid running out of retirement savings, you really need to make a plan.
