The S&P 500 commenced August under significant strain on Thursday, as softer economic data rekindled concerns about a looming recession. At 16:00 ET (20:00 GMT), the Dow Jones Industrial Average plummeted by 669 points, or 1.6%, while the S&P 500 and NASDAQ Composite both declined by 2.8%.

Weaker U.S. Data Ignites Economic Jitters Ahead of Nonfarm Payrolls

Initial jobless claims rose to 249,000 for the week ending July 27, surpassing expectations. Concurrently, the ISM manufacturing index for July registered at 46.8, falling short of the 48.2 forecast. These reports have intensified fears of an economic downturn, even as the Federal Reserve is anticipated to lower interest rates next month. Reflecting market anxiety, the 10-year Treasury yield dipped below 4% for the first time since February.

On Wednesday, the Federal Reserve opted to keep interest rates unchanged. However, Chairman Jerome Powell indicated that a rate cut in September remains a possibility if forthcoming economic data, including the monthly nonfarm payrolls due on Friday, continue to demonstrate progress on inflation and a cooling labor market.

Tech Sector Stumbles Amid Chip Weakness; Meta Surges; Apple Earnings in Focus

Technology stocks mirrored the broader market's decline, despite Meta Platforms (NASDAQ: META) surging nearly 5% on the back of stronger-than-expected second-quarter earnings and optimistic guidance. The positive results underscore that Meta's investments in AI to enhance targeted ad efficacy are beginning to pay off.

Apple Inc. (NASDAQ: AAPL) reported third-quarter results on Thursday that exceeded Wall Street estimates. A rise in services revenue helped counterbalance weaker iPhone sales amidst rising competition in China. Following the report, Apple shares remained flat in after-hours trading.

Apple disclosed Q3 earnings of $1.40 per share on revenue of $85.8 billion, surpassing analysts’ expectations of $1.35 per share on $84.45 billion in revenue. Revenue climbed 5%, driven by a 14% increase in services revenue to a record $24.21 billion, exceeding the anticipated $24.01 billion. However, sales of the flagship iPhone, accounting for nearly half of Apple’s total revenue, slipped to $39.30 billion from $39.67 billion a year earlier, though they still beat the $38.81 billion estimate. In China, sales dropped 6.5% to $14.72 billion, as the iPhone faces growing competition from local manufacturers like Huawei.

Investor attention is now focused on Apple's earnings call, where details on future guidance and Apple Intelligence are highly anticipated.

Amazon Reports Strong Earnings but Faces Setback on Guidance

Amazon (NASDAQ: AMZN) reported second-quarter earnings that surpassed analyst predictions, yet its stock fell 5% in after-hours trading due to less favorable guidance for the third quarter. The e-commerce and cloud computing giant posted adjusted earnings per share of $1.26 for the quarter ending June 30, 2024, exceeding the analyst estimate of $1.03. Revenue totaled $148.0 billion, slightly below the consensus estimate of $148.68 billion but up 10% year-over-year from $134.4 billion in the same quarter last year.

However, Amazon's third-quarter revenue guidance of $154-158.5 billion fell short of analyst expectations of $158.2 billion, contributing to the stock's decline. Andy Jassy, Amazon President & CEO, emphasized the company’s progress, particularly in the reacceleration of AWS growth. Amazon Web Services (AWS) reported sales of $26.3 billion, a 19% year-over-year increase, while the North America segment saw a 9% rise to $90.0 billion. The International segment grew 7% to $31.7 billion, or 10% excluding foreign exchange impacts. Operating income more than doubled to $14.7 billion from $7.7 billion in the second quarter of 2023.

Market Outlook

As investors digest these mixed economic signals and corporate earnings, the market's trajectory remains uncertain. The upcoming nonfarm payrolls report will be critical in shaping expectations for Federal Reserve policy and the broader economic outlook. With recession fears back in the spotlight, the performance of key sectors and companies will be closely monitored in the weeks ahead.