Stock Slide as Investors Wrestle With Shifting Bets on Rate Cuts

Stocks fell on Friday at the end of a bruising week for Wall Street, as investors grappled with weaker than expected labor market data and a warning from a Federal Reserve governor that bigger than usual rate cuts may be needed to avoid a sharp economic slowdown.

The S&P 500 fell 1.8 percent, its fourth consecutive daily decline and one that put the index on course for its worst week of the year. Other stock gauges also fared poorly, with the Nasdaq Composite dropping 2.6 percent and the Russell 2000 index of smaller companies slumping 1.8 percent.

The Bureau of Labor Statistics reported on Friday that employers added 142,000 jobs in August. That was fewer than economists expected, and the hiring numbers for June and July were also revised downward.

On the heels of fresh data, Chris Waller, a Fed governor, hinted at the possibility of a larger half percentage point cut later this month, saying that “the current batch of data no longer requires patience, it requires action.”

With uncertainty over the economic outlook, investors have been left jittery. Stocks had steadily rallied for the first half of the year, leaving many investors sitting on healthy returns. The S&P 500 peaked in July, with a gain of over 18 percent for the year. Even after the recent pullback from those highs the index remains roughly 13 percent higher for the year.

Investors appear keen not to sacrifice gains made earlier in the year by betting that the rally could still inch a little higher: An August survey of fund managers by Bank of America showed that while most still expect the economy to keep growing as the Fed lowers interest rates, the level of concern over a misstep by the central bank is high.