Markets nosedive after a weak jobs report and recession worries

Dow plummeted 962, decliners over advancers better than 5-1 & NAZ sank 523.  The MLP index fell a big 7+ to the 278s & the REIT index was off 2+ to the 408s.  Junk bond funds were sold along with stocks & Treasuries were heavily purchased which sharply lowered yields.  Oil dropped 2+ to the 73s & gold was off 3 to 2477 (remaining in record territory).

Dow Jones Industrials 

US job growth cooled sharply in Jul while the unemployment rate unexpectedly rose to the highest level in nearly 3 years.  The Labor Dept reported that employers added 114K jobs in Jul, missing the 175K gain forecast.  The unemployment rate also unexpectedly inched higher to 4.3% against expectations that it would hold steady at 4.1%.  It marked the highest level for the jobless rate since Oct 2021.  "Temperatures might be hot around the country, but there’s no summer heatwave for the job market," said Becky Frankiewicz, pres of ManPowerGroup North America.  "With across-the-board cooling, we have lost most of the gains we saw from the first quarter of the year."  This report adds to mounting evidence that the economy is weakening in the face of ongoing inflation & high interest rates.  Stocks fell as the report reignited fears of an impending recession.  That's because the rise in unemployment triggered the Sahm Rule, an indicator that is used to provide an early recession signal.  The rule stipulates that a recession is likely when the 3-month moving average of the jobless rate is at least a ½-percentage point higher than the 12-month low.  Over the past 3 months, the unemployment rate has averaged 4.13%, which is 0.63 percentage points higher than the 3.5% rate recorded in Jul 2023.  The Sahm Rule has successfully predicted every recession since 1970.  The weaker-than-expected data also raises questions about whether the Federal Reserve has waited too long to cut interest rates.  Policymakers voted at the conclusion of their 2-day meeting on Wed to hold rates steady at a 23-year high, but signaled that they could start loosening policy as soon as Sep.  Investors are now increasingly betting on the odds of a 50-basis point cut in Sep amid signs that job growth is deteriorating.

US job growth slows to 114K in July while unemployment rate unexpectedly jumps

Amazon (AMZN) shares plunged when the company reported mixed 2nd-qtr results & gave a forecast for the 3rd qtr that fell short of expectations.  Revenue in the 2nd qtr rose 10% from a year earlier to $148B, falling just short of $148.56B.  Net income doubled from a year earlier to $1.26 a share, topping estimates of $1.03 per share & providing the latest evidence that its focus on cost-cutting is bolstering its bottom line.  For the 3rd qtr, which runs thru Sep, AMZN expects revenue of $154.0 - $158.5B.  The midpoint of the range, $156.25B, fell short of consensus estimates of $158.24B.  The saw softer-than-anticipated sales because consumers continue to “trade down” to lower ticket items, such as everyday essentials & consumables, or items that tend to be cheaper & used up on a regular basis.  What's more, a chaotic news cycle means that consumers are more distracted than usual & may wait to make a purchase or abandon their cart altogether, CFO Brian Olsavsky said.  Olsavsky pointed to the Olympics, the ramp up to the presidential election, & the recent assassination attempt of former Pres Trump as recent events that have distracted consumers & made it a “tough quarter to forecast.”  The stock plunged $20 (11%).

Amazon shares tumble 12% after third-quarter outlook disappoints

Exxon Mobil (XOM), a Dow stock & Dividend Aristocrat, posted its 2nd-highest results for the 2nd qtr in the past decade, as the company achieved record production in Guyana & the Permian Basin.  “If you look at the oil that we produced in the second quarter, it is the highest level we produced since Exxon and Mobil merged,” CEO Darren Woods said.  Net income per share was $2.14, a 17% increase over profits of $1.94 per share, in the year-ago period.  The acquisition of Pioneer Natural, which closed in May, contributed $500M to earnings.  Revenue rose to $93.1B from $82.9B a year ago, which was enough to top estimates of $91B.  YTD, the oil major booked profits of $17.5B, a 9% decline from $19.3B in the same period in 2023 due to lower refining margins & natural gas prices.  Production grew by 15%, or 574K barrels per day, to 4.4M bpd from the first qtr, driven by records in Guyana & the Permian.  Capital& exploration expenditures totaled $7B in the qtr, including $700M related to the Pioneer deal, bringing total spending this year to nearly $13B.  XOM expects $28B in capital spending for the year.  Shareholder returns came in at $9.5B, including $4.3B in divs & $5.2B in share buybacks.  The stock fell 83¢ while other stocks tumbled.

Exxon earnings beat as production in Guyana and Permian sets a record

Stocks across the board have no friends today after the Jul jobs report showed more cooling in the labor market, fueling concerns the Federal Reserve's "higher for longer" interest-rate stance might end in recession.  The US economy added fewer jobs than expected in Jul, while the unemployment rate unexpectedly rose to 4.3%.  Those additional signs of a slowdown in the labor market are likely to feed recession fears & rate-cut expectations.  Traders are pricing in 3 rate cuts this year (Sep, Nov & Dec) & bets are on a 50 basis-point reduction in Sep.  The yield on the benchmark 10-year Treasury dived further below the 4% level after the labor-market update, trading around 3.84%.  The bears are in command today.