Down day, down week for stocks

The stock market closed out its worst week in more than two months Friday as a second straight day of turbulent trading ended with more losses. The S&P 500 fell 0.8% after clawing most of the way back from a 3.1% skid earlier in the day. Another slide in technology stocks, which led the selling a day earlier, pulled the market sharply lower for much of the day, though the selling eased by late afternoon.

What happened

The two-day sell-off handed the benchmark index its first weekly loss after five weeks of gains. Earlier in the week, the S&P 500 was notching all-time highs and posting its biggest increases in nearly two months.

There wasn’t a particular catalyst for continued selling in the high-flying tech sector, but analysts noted those stocks had posted gigantic gains so far this year that many thought were overdone.

The selling followed a Labor Department report showing U.S. hiring slowed to 1.4 million last month, the fewest jobs since the pandemic began, even as the nation’s unemployment rate improved to 8.4% from 10.2%. The U.S. economy has recovered about half the 22 million jobs lost to the pandemic.

The Dow Jones Industrial Average lost 0.6% after swinging sharply during the day, between a loss of as much as 628 points and a gain of as much as 247.

The technology-heavy Nasdaq dropped 1.3% on top of the index’s 5% skid from the day before.

What it means

“We had a fast and furious rally at the end of August, and we’ve given it back,” said Barry Bannister, head of institutional equity strategy at Stifel. “Investors are like a herd of gazelle on the Serengeti; it doesn’t take much to spook them.”

Stephanie Roth, portfolio macro analyst at J.P. Morgan Private Bank, noted it isn’t unusual for traders to pocket recent gains ahead of a holiday weekend. “This is more an instance of profit-taking, rather than true panic.”

Many investors are also betting a coronavirus vaccine will arrive later this year and clear the way for a recovery for the economy and corporate profits. Hopes also remain that Congress and the White House will come up with another economic relief package.

“Unless Congress agrees to spend more money to stimulate the economy and close the output gap, it’s very hard for us to grow,” Bannister said.

MARK LENNIHAN /AP The selling followed a Labor Department report showing hiring slowed to 1.4 million last month, and the nation’s unemployment rate improved to 8.4% from 10.2%.