Dow Jones Industrial Average tumbles 250 points as NFP figures dip faster than expected

• The Dow Jones backslid on Friday, falling back below 45,500.
• NFP job gains came in well below expectations, adding further bets to Fed rate cuts.
• A steepening decline in job creation has gone too far, overshooting market hopes for rate cuts and reigniting recessionary concerns.

The Dow Jones Industrial Average (DJIA) sank on Friday, falling nearly 500 points at its lowest after United States (US) Nonfarm Payrolls (NFP) data showed the US added far fewer jobs than expected, pinning expectations of a Federal Reserve (Fed) interest rate cut on September 17.

The latest NFP jobs report showed the US added just 22K net new jobs in August, coming in even lower than the median market forecast of 75K. The previous month's figure was revised upward slightly to 79K, but August's sharp drop has pushed bets of a Fed rate cut into the ceiling. Market talk of a jumbo double-cut is back on the table, with rate markets pricing in 10% odds of a 50 basis point interest rate trim on the Fed's next rate call this month.

Equities fumble expectations for low but not too-low NFP figures

Despite equity traders getting their wish for an underperforming NFP print, the latest round of jobs data has turned into a monkey's paw scenario. While low hiring figures will help push the Fed into an interest rate cut in a couple of weeks, too low of an NFP figure has reignited recession fears across the broader market. Despite hitting a new all-time high on intraday bids, the Dow Jones has recoiled sharply from record territory, paring away Thursday's hopeful gains and sending the major equity index back into the red for the week.

Next week poses a fresh set of challenges for data watchers. The latest round of Consumer Price Index (CPI) inflation and University of Michigan (UoM) Consumer Sentiment and Inflation Expectations are due next Thursday and Friday, respectively. Headline CPI inflation is again expected to tick higher for the year ended in August, while market forecasts expect the UoM Consumer Sentiment Index to recover ground.

Dow Jones daily chart