September started on a downbeat note for the stock market.
The major indices all registered sizable decline on this holiday‐shortened week. Broad selling activity led the S&P 500 to fall below its 50‐day moving average.
The downside bias was related to normal consolidation activity after a big run. This was sparked by fears about a weakening labor market and economic growth prospects. Friday's release of the August Employment Situation report added to the market's emerging fears.
Hiring activity was lighter than expected in August and there were downward revisions to July and June that left employment 86,000 lower for those months than previously reported. The report also showed that the unemployment rate declined slightly and average hourly earnings increased a stronger than expected 0.4% month‐over‐month.
This week's labor market data included the ADP Employment Change Report for August, which was weaker than expected, and the weekly initial jobless claims report, which was better than expected. Other influential data included the revised Q2 productivity report that showed an upward revision to productivity and a downward revision to unit labor costs, and the ISM Services PMI for August, which was better than expected but little changed from July.
Weakness in the semiconductor space also contributed to the negative bias. The PHLX Semiconductor Index (SOX) dropped 12.2% this week. Broadcom (AVGO) was among the notable names in the space, sliding 15.9% after relatively disappointing guidance that piled onto current fears that the pace of growth is slowing for many richly‐valued semiconductor stocks.
The aforementioned price action led the S&P 500 information technology sector to close 7.1% lower on the week. It was the worst performing sector followed by energy (‐5.6%), communication services (‐5.1%), and materials (‐4.8%).
The only sectors to close higher this week were the rate‐sensitive real estate sector (+0.2%) and the consumer staples sector (+0.6%).
The 10‐yr note yield settled 20 basis points lower at 3.71%. The 2‐yr note yield settled 28 basis points lower at 3.65%.
S&P 500: ‐4.3% for the week / +13.4% YTD
Nasdaq Composite: ‐5.8% for the week / +11.2% YTD
S&P Midcap 400: ‐4.9% for the week / +5.7% YTD
Dow Jones Industrial Average: ‐2.9% for the week / +7.1% YTD
Russell 2000: ‐5.7% for the week / +3.2% YTD