US recession fears haunting investors, stocks

NEW YORK

Global stocks closed the week on a downcast note after poor U.S. jobs data stoked recession fears while Japan's Nikkei tumbled on a resurgent yen.

The U.S. economy added 114,000 jobs last month, a drop from the prior month and fewer than expected, while the jobless rate rose to 4.3 percent, the highest level since October 2021.

The report added to recession fears following lackluster manufacturing data on Aug. 1, pushing major U.S. indices into the red for the entire day after a down session in Europe.

"Historically it's very difficult to achieve a soft landing," said Steve Sosnick of Interactive Brokers.

"It's easy for a soft landing to sneak up on you and become a hard landing. And that's what the market is very much afraid of right now,” he said. 

"And just like that, the market is worried about the U.S. economy suffering a hard landing," said Briefing.com analyst Patrick O'Hare.

"A sober market didn't need any more cold water poured on it, but that is exactly what it got with the July employment report, which was filled with ample headline disappointment," he said.

But Art Hogan of B. Riley Wealth said the market is likely overreacting to a few weak data points, noting that most of the corporate earnings released in the last few weeks have been solid.

"The situation now shifts from 'if' the Fed will cut to 'by how much' will they cut," said Bret Kenwell, US investment analyst at trading platform eToro.

"The labor market is the lifeblood to the U.S. economy and the Fed needs to ensure that they don't risk weakening it too much solely in an effort to bring down inflation," he said.