Stocks close lower as slowing labor market boosts rate cut hopes but fans economic fears

Stocks closed lower on Friday after a weaker-than-expected U.S. jobs report gave way to worries about a slowing U.S. economy, even as expectations for a Federal Reserve rate cut were solidified.

The S&P 500 finished the day down 0.32% at 6,481.50, while the Nasdaq Composite declined 0.03% to settle at 21,700.39. The Dow Jones Industrial Average closed down 220.43 points, or 0.48%, at 45,400.86.

All three leading indexes had reached fresh record intraday highs earlier in the session. At their peaks, the broad market index, the tech-heavy Nasdaq and the blue-chip Dow were up about 0.5%, 0.8% and 0.3%, respectively.

The economy added just 22,000 jobs in August, the Bureau of Labor Statistics reported Friday. That’s below the 75,000 that economists polled by Dow Jones had expected. The unemployment rate also rose to 4.3%, in line with expectations.

The report supported expectations for at least a quarter-point rate cut by the Fed at its meeting later this month. Traders also put a half-point rate cut into play, per the FedWatch tool.

“Slower job gains, combined with an uptick in the unemployment rate and moderating wage growth, support the view that the rate of positive change in the labor market has slowed significantly,” said Jamie Cox, managing partner at Harris Financial Group. “These employment data give the Fed all the reasons it needs to shift its balance of risks and lower rates in two weeks.”