NEW YORK (AP) — Stocks tumbled Friday on worries the U.S. economy could be cracking under the weight of high interest rates meant to whip inflation. The S&P 500 fell 1.8% Friday for its first back-to-back loss of at least 1% since April. The Dow Jones Industrial Average lost 1.5%, and the Nasdaq composite fell 2.4%. A report showing hiring by U.S. employers slowed last month by much more than expected sent fear through markets. Intel sank to its worst day in 50 years after reporting weaker-than-expected profits and suspending its dividend. Treasury yields tumbled as expectations built for how deeply the Federal Reserve will cut rates in September.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
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A trio of traders work on the floor of the New York Stock Exchange, Friday, Aug. 2, 2024. (AP Photo/Richard Drew)
Traders gather at the post of specialist Stephen Naughton, right,on the floor of the New York Stock Exchange, Friday, Aug. 2, 2024. (AP Photo/Richard Drew)
Trader John Romolo works on the floor of the New York Stock Exchange, Friday, Aug. 2, 2024. (AP Photo/Richard Drew)
Specialist James Denaro works at his post on the floor of the New York Stock Exchange, Friday, Aug. 2, 2024. (AP Photo/Richard Drew)
FILE - People pass the New York Stock Exchange on July 31, 2024 in New York. World shares have tumbled on Friday, August 2, 2024, with Japan's Nikkei 225 index slumping 5.8% as investors panicked over signs of weakness in the U.S. economy.(AP Photo/Peter Morgan, File)
A person walks in front of an electronic stock board showing Japan's Nikkei 225 index Friday, Aug. 2, 2024, in Tokyo. Shares in Europe and Asia tumbled Friday, with Japan’s Nikkei 225 index slumping 5.8% as investors panicked over signs of weakness in the U.S. economy. (Kyodo News via AP)
A person walks in front of an electronic stock board showing Japan's Nikkei 225 index Friday, Aug. 2, 2024, in Tokyo. Shares in Europe and Asia tumbled Friday, with Japan’s Nikkei 225 index slumping 5.8% as investors panicked over signs of weakness in the U.S. economy. (Kyodo News via AP)
A currency trader passes by the screen showing the Korea Composite Stock Price Index (KOSPI) at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Friday, Aug. 2, 2024. (AP Photo/Ahn Young-joon)
Currency traders watch monitors near the screen showing the Korea Composite Stock Price Index (KOSPI), top left, and the foreign exchange rate between U.S. dollar and South Korean won, top center, at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Friday, Aug. 2, 2024. (AP Photo/Ahn Young-joon)
An electronic stock board shows that Nikkei stock average dropped over 1,900 Japanese yen from previous day, in Tokyo Friday, Aug. 2, 2024. (Kyodo News via AP)
A currency trader watches monitors near the screen showing the Korea Composite Stock Price Index (KOSPI), left, and the foreign exchange rate between U.S. dollar and South Korean won at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Friday, Aug. 2, 2024. (AP Photo/Ahn Young-joon)
People pass by an electronic stock board in Tokyo Friday, Aug. 2, 2024. (Kyodo News via AP)
NEW YORK (AP) — Stocks are tumbling Friday on worries the U.S. economy could be cracking under the weight of high interest rates meant to whip inflation.
The S&P 500 was sinking by 2.1% in afternoon trading. The Dow Jones Industrial Average was down 775 points, or 1.9%, with a little more than an hour remaining in trading, and the Nasdaq composite was 2.6% lower as a sell-off for stocks whipped all the way around the world back to Wall Street.
A report showing hiring by U.S. employers slowed last month by much more than economists expected sent fear through markets, with both stocks and bond yields dropping sharply. It followed a batch of weaker-than-expected reports on the economy from a day earlier, including a worsening for U.S. manufacturing activity, which has been one of the areas hurt most by high rates.
It was just a couple days ago that U.S. stock indexes jumped to their best day in months after Federal Reserve Chair Jerome Powell gave the clearest indication yet that inflation has slowed enough for cuts to rates to begin in September.
Now, worries are rising the Fed may have kept its main interest rate at a two-decade high for too long. A rate cut would make it easier for U.S. households and companies to borrow money and boost the economy, but it could take months to a year for the full effects to filter through.
“The Fed is seizing defeat from the jaws of victory,” said Brian Jacobsen, chief economist at Annex Wealth Management. “Economic momentum has slowed so much that a rate cut in September will be too little and too late. They’ll have to do something bigger than” the traditional cut of a quarter of a percentage point ”to avert a recession.”
Traders are now betting on a nearly three-in-four chance that the Fed will cut its main interest rate by half a percentage point in September, according to data from CME Group. That's even though Powell said Wednesday that such a deep reduction is “not something we're thinking about right now.”
Of course, the U.S. economy is still growing, and a recession is far from a certainty. The Fed has been clear about the tightrope it's walking since it started hiking rates sharply in March 2022: Being too aggressive would choke the economy, but going too soft would give inflation more oxygen and hurt everyone.
While refusing to claim victory on either the jobs or the inflation fronts on Wednesday, before the discouraging economic reports hit, Powell said Fed officials “have a lot of room to respond if we were to see weakness” in the job market after hiking its main rate so high.
“Certainly today’s job data feeds the weakening economy narrative, but I believe the market is overreacting at this point and pricing too much in on rate cuts at this stage,” said Nate Thooft, senior portfolio manager at Manulife Investment Management. “Yes, the economy is weakening, but I am not convinced there is enough evidence that the data so far is a death knell for the economy.”
U.S. stocks had already appeared to be headed for losses Friday before the disappointing jobs report thudded onto Wall Street.
Several big technology companies turned in underwhelming profit reports, which continued a mostly dispiriting run that began last week with results from Tesla and Alphabet.
Amazon fell 9.2% after reporting weaker revenue for the latest quarter than expected. The retail and tech giant also gave a forecast for operating profit for the summer that fell short of analysts’ expectations.
Intel dropped even more, 26.7% and on pace for its worst day in 50 years, after the chip company’s profit for the latest quarter fell well short of forecasts. It also suspended its dividend payment and said it expects to lose money in the third quarter, when analysts were expecting a profit.
Apple was holding steadier, up 2.2%, after reporting better profit and revenue than expected.
Apple and a handful of other Big Tech stocks known as the “ Magnificent Seven ” have been the main reasons the S&P 500 has set dozens of records this year, in part on a frenzy around artificial-intelligence technology. But their momentum turned last month on worries investors had taken their prices too high and expectations for future growth are too difficult to meet.
Friday's losses for tech stocks dragged the Nasdaq composite down by more than 10% from its record set in the middle of last month.
Helpfully for Wall Street, other areas of the stock market beaten down by high interest rates had been rebounding last month when tech stocks were regressing, particularly smaller companies. But they tumbled too Friday on worries that a fragile economy could undercut their profits.
The Russell 2000 index of smaller stocks dropped 3.6%, more than the rest of the market.
In the bond market, Treasury yields fell sharply as traders raised their expectations for how deeply the Federal Reserve would have to cut interest rates. The yield on the 10-year Treasury fell to 3.79% from 3.98% late Thursday and from 4.70% in April.
In stock markets abroad, Japan’s Nikkei 225 dropped 5.8%. It's been struggling since the Bank of Japan raised its benchmark interest rate on Wednesday. The hike pushed the value of the Japanese yen higher against the U.S. dollar, potentially hurting profits for exporters and deflating a boom in tourism.
Chinese stocks fell week as investors registered disappointment with the government’s latest efforts to spur growth through various piecemeal measures, instead of hoped-for infusions of broader stimulus, while stock indexes dropped by more than 1% across much of Europe.
Commodity prices have also had a rough ride this week. Oil prices surged after the killings of leaders of Hamas and Hezbollah that fueled fears that a widening conflict in the Middle East could disrupt the flow of crude.
But prices fell back Thursday and Friday on worries that a weakening economy will burn less fuel. A barrel of benchmark U.S. crude tumbled back below $74 Friday after coming into the week above $77.
AP Business Writers Matt Ott and Elaine Kurtenbach contributed.
A trio of traders work on the floor of the New York Stock Exchange, Friday, Aug. 2, 2024. (AP Photo/Richard Drew)
Traders gather at the post of specialist Stephen Naughton, right,on the floor of the New York Stock Exchange, Friday, Aug. 2, 2024. (AP Photo/Richard Drew)
Trader John Romolo works on the floor of the New York Stock Exchange, Friday, Aug. 2, 2024. (AP Photo/Richard Drew)
Specialist James Denaro works at his post on the floor of the New York Stock Exchange, Friday, Aug. 2, 2024. (AP Photo/Richard Drew)
FILE - People pass the New York Stock Exchange on July 31, 2024 in New York. World shares have tumbled on Friday, August 2, 2024, with Japan's Nikkei 225 index slumping 5.8% as investors panicked over signs of weakness in the U.S. economy.(AP Photo/Peter Morgan, File)
A person walks in front of an electronic stock board showing Japan's Nikkei 225 index Friday, Aug. 2, 2024, in Tokyo. Shares in Europe and Asia tumbled Friday, with Japan’s Nikkei 225 index slumping 5.8% as investors panicked over signs of weakness in the U.S. economy. (Kyodo News via AP)
A person walks in front of an electronic stock board showing Japan's Nikkei 225 index Friday, Aug. 2, 2024, in Tokyo. Shares in Europe and Asia tumbled Friday, with Japan’s Nikkei 225 index slumping 5.8% as investors panicked over signs of weakness in the U.S. economy. (Kyodo News via AP)
A currency trader passes by the screen showing the Korea Composite Stock Price Index (KOSPI) at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Friday, Aug. 2, 2024. (AP Photo/Ahn Young-joon)
Currency traders watch monitors near the screen showing the Korea Composite Stock Price Index (KOSPI), top left, and the foreign exchange rate between U.S. dollar and South Korean won, top center, at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Friday, Aug. 2, 2024. (AP Photo/Ahn Young-joon)
An electronic stock board shows that Nikkei stock average dropped over 1,900 Japanese yen from previous day, in Tokyo Friday, Aug. 2, 2024. (Kyodo News via AP)
A currency trader watches monitors near the screen showing the Korea Composite Stock Price Index (KOSPI), left, and the foreign exchange rate between U.S. dollar and South Korean won at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Friday, Aug. 2, 2024. (AP Photo/Ahn Young-joon)
People pass by an electronic stock board in Tokyo Friday, Aug. 2, 2024. (Kyodo News via AP)
LOS ANGELES (AP) — Parched Southern California was forecast to face more dangerous winds on Wednesday but could get some needed rain this weekend, dampening prospects of another round of deadly wildfires while raising the possibility of challenges like toxic ash runoff.
Los Angeles officials were preparing for that prospect even as some residents were allowed to return to the devastated Pacific Palisades and Altadena areas and firefighters extinguished small blazes that broke out during gusty weather expected to last through Thursday.
“We're going to see another round of critical fire conditions across Southern California,” Todd Hall, a National Weather Service meteorologist, said in an interview Wednesday morning. “At this point, it sounds like a broken record.”
Mayor Karen Bass issued an executive order Tuesday to expedite cleanup efforts in burn areas and mitigate the environmental impacts of fire-related pollutants. She ordered crews to remove vegetation, shore up hillsides, install barriers and reinforce roads ahead of the possible weekend rain, which could create mud and debris flows.
Los Angeles County supervisors also approved an emergency motion to install flood control infrastructure and expedite and remove sediment in fire-impacted areas.
A 60% to 80% chance of a small amount of rain was forecast for Southern California starting Saturday, with most areas likely getting not more than a third of an inch (0.8 centimeters), according to Ryan Kittell, a meteorologist for the weather service’s office for Los Angeles. However up to an inch (2 1/2 centimeters) could fall in localized thunderstorms, which would be a worst-case scenario if enough flows on scorched hillsides to trigger debris.
“But even if the rain doesn’t materialize this time, it could be a good practice run for those communities because this will be a threat that they’ll have to deal with for months or years,” Kittell said.
Fire crews were filling sandbags for communities.
In 2018, Montecito, a town 80 miles (130 kilometers) up the coast from Los Angeles, was ravaged by mudslides after a downpour hit mountain slopes burned bare by a huge wildfire. Twenty-three people died, and hundreds of homes were damaged.
Winds eased somewhat Tuesday afternoon after peaking at 60 mph (96 kph) in many areas, but gusty conditions were expected to continue. Red flag warnings for critical fire risk were extended through 8 p.m. Thursday in LA and Ventura counties.
“Our concern is the next fire, the next spark that causes the next wildfire,” said David Acuna, a spokesman with the California Department of Forestry and Fire Protection, or Cal Fire. Another worry was that two major blazes, the Palisades and Eaton fires, could break their containment lines as firefighters continue to watch for hot spots.
Fire engines and water-dropping aircraft positioned strategically allowed crews to swiftly douse several small blazes that popped up in LA and San Diego counties, officials said.
Evacuation orders were lifted Tuesday for the Friars Fire, which broke out near a San Diego mall, and partially for the Lilac Fire, which burned through dry brush after threatening some structures, Cal Fire said. Nearby crews fully contained the Pala Fire, another small blaze. The Clay Fire in Riverside was 40% contained Tuesday night and evacuation orders were lifted.
Southern California Edison on Tuesday preemptively shut off power to more than 60,000 customers in five counties to prevent new fires from being sparked by winds toppling electrical equipment; electricity was later restored to most. The utility was considering precautionary shutoffs for an additional 187,000 customers on Wednesday.
Authorities urged residents to review evacuation plans, prepare emergency kits and be on the lookout for fires and report them quickly.
Bass also warned that winds could carry ash and advised Angelenos to visit the city's website to learn how to protect themselves from toxic air during the latest Santa Ana wind event.
The low humidity, bone-dry vegetation and strong winds came as firefighters continued to battle the Palisades and Eaton fires, which have killed at least 28 people and destroyed more than 14,000 structures since they broke out Jan. 7. Containment of the Palisades Fire reached 68%, and the Eaton Fire was at 91%.
The federal Bureau of Alcohol, Tobacco and Firearms is investigating the causes of the fires but has not released any findings.
Several lawsuits have been filed by people who lost their homes in the Eaton Fire, alleging Southern California Edison equipment sparked the blaze. On Tuesday a judge overseeing one of the lawsuits ordered the utility to produce data from circuits in the area where the fire started.
President Donald Trump, who criticized the response to the wildfires during his inaugural address Monday, has said he will travel to Los Angeles on Friday.
Associated Press radio reporter Julie Walker in New York contributed to this report.
Firefighter Joshua Cari sprays water while battling the Lilac Fire near the Bonsall community of San Diego County, Calif., on Tuesday, Jan. 21, 2025. (AP Photo/Noah Berger)
A firefighter sprays water while battling the Lilac Fire near the Bonsall community of San Diego County, Calif., on Tuesday, Jan. 21, 2025. (AP Photo/Noah Berger)
Firefighters stand along a ridge as they battle the Lilac Fire in Bonsall, Calif., Tuesday, Jan. 21, 2025. (AP Photo/Jae C. Hong)
Two firefighters roll up a fire hose during the Lilac Fire in Bonsall, Calif., Tuesday, Jan. 21, 2025. (AP Photo/Jae C. Hong)
Firefighters walk up a ridge to battle the Lilac Fire in Bonsall, Calif., Tuesday, Jan. 21, 2025. (AP Photo/Jae C. Hong)
Residences destroyed by the Eaton Fire line a neighborhood in Altadena, Calif., on Tuesday, Jan. 21, 2025. (AP Photo/Noah Berger)
San Diego firefighters knock down a small brush along a hillside over the Mission Valley Shopping Mall in San Diego on Tuesday, Jan. 21, 2025. (AP Photo/Gregory Bull)
Residences destroyed by the Eaton Fire line a neighborhood in Altadena, Calif., on Tuesday, Jan. 21, 2025. (AP Photo/Noah Berger)
Firefighters battle the Lilac Fire along Interstate 15 near the Bonsall community of San Diego County, Calif., on Tuesday, Jan. 21, 2025. (AP Photo/Noah Berger)
A firefighter battles the Lilac Fire near the Bonsall community of San Diego County, Calif., on Tuesday, Jan. 21, 2025. (AP Photo/Noah Berger)
A lone home stands among residences levelled by the Eaton Fire in Altadena, Calif., on Tuesday, Jan. 21, 2025. (AP Photo/Noah Berger)
A woman search inside a destroyed home by the Eaton Fire in Altadena, Calif., on Tuesday, Jan. 21, 2025. (AP Photo/Noah Berger)
Residences destroyed by the Eaton Fire line a neighborhood in Altadena, Calif., on Tuesday, Jan. 21, 2025. (AP Photo/Noah Berger)
Firefighter Joshua Cari sprays water while battling the Lilac Fire near the Bonsall community of San Diego County, Calif., on Tuesday, Jan. 21, 2025. (AP Photo/Noah Berger)
Vehicles pass through smoke from the Lilac Fire in Bonsall, Calif., Tuesday, Jan. 21, 2025. (AP Photo/Jae C. Hong)
Vehicles drive along Interstate 15 as the Lilac Fire burns along a hillside in Bonsall, Calif., Tuesday, Jan. 21, 2025. (AP Photo/Jae C. Hong)
San Diego firefighters knock down a small brush along a hillside over the Mission Valley Shopping Mall in San Diego on Tuesday, Jan. 21, 2025. (AP Photo/Gregory Bull)
San Diego firefighters knock down a small brush along a hillside over the Mission Valley Shopping Mall in San Diego on Tuesday, Jan. 21, 2025. (AP Photo/Gregory Bull)