An otherwise quiet week of trading turned volatile on Thursday as stocks tumbled amid fresh concerns about the growth potential of technology stocks and artificial intelligence. Although the major indexes regained positive momentum on Friday, the S&P 500 and the NASDAQ ended with weekly declines of more than 1%; the Dow’s decline was fractional. Growth stocks generally lagged value shares, due partly to cautious earnings reports from Facebook parent Meta Platforms and software giant Microsoft. Small-caps also held up much better than large-caps with the Russell 2000 ending just above even on the week.

U.S. nonfarm-jobs report for the month of October came in well below expectations, with 12,000 jobs added versus forecasts of 100,000. The last two months were also revised lower by 112,000, although they were still relatively healthy at 78,000 and 223,000. The average monthly jobs added this year are now at about 170,000, below last year's average of 250,000 but still above the long-term average of 148,000. The weakness in last month's jobs, however, was largely due to two factors: labor strikes at Boeing and impacts from Hurricanes Helene and Milton. The Bureau of Labor Statistics (BLS) estimates that the Boeing strike may have reduced jobs by around 46,000, while the two hurricanes are estimated to have had a negative impact of between 40,000 and 70,000 jobs. Adding these back to last month's jobs report would have likely yielded a figure in line with estimates but still below the average pace of gains this year.

The U.S. Federal Reserve’s preferred inflation gauge showed further slow-but-steady easing of price pressures. The Personal Consumption Expenditures Index rose at an annual rate of 2.1% in September, down from 2.3% in August and the lowest figure since February 2021. Excluding energy and food prices, the core PCE Index rose 2.7% in September.

The Institute for Supply Management’s gauge of manufacturing activity had declined unexpectedly for the seventh straight month to 46.5, its lowest level in 15 months. “Demand remains subdued,” the Institute’s chair noted, “as companies continue to show an unwillingness to invest in capital and inventory due to concerns (for example, inflation resurgence) about federal monetary policy direction in light of the fiscal policies proposed by both major parties.”

Yields of U.S. government bonds rose for the sixth week out of the past seven, but at a somewhat slower pace. The yield of the 10-year note closed at 4.37% on Friday—up from 4.24% at the end of the previous week and well above a recent low of 3.62% on September 16.

In addition to U.S. elections tomorrow, the November Federal Reserve meeting is also on deck for Wednesday and Thursday. Given the weaker-than-expected jobs report and downward revisions, the Fed is likely on track to cut rates this week by 0.25%. In fact, markets are now pricing in higher probabilities of rate cuts at both the November and December Fed meetings.