U.S. stock markets ended lower on Friday, leading all three major indexes to report their largest weekly percentage declines in several years. This was triggered by a disappointing jobs report, which left investors uncertain about the extent to which the Federal Reserve may reduce interest rates in the upcoming weeks.

During the week, the S&P 500 fell by 4.25% and the Dow dropped by 2.93%. Both figures mark their biggest weekly losses since March 2023. The Nasdaq saw a decline of 5.77% for the week, the largest since January 2022.

In August, U.S. employers added only 142,000 jobs, falling short of Bloomberg’s expected 163,000. The revised figure for July was also disappointing at 89,000. Meanwhile, the unemployment rate edged down slightly to 4.2%, from 4.3% in July.

This slowdown in job growth indicates an economic weakening, virtually ensuring that the Fed will cut rates at the conclusion of its policy meeting on September 18. However, some analysts suggest that the Fed’s potential rate cuts may come too late for the economy to achieve a soft landing, according to Lou Basenese, who is the president and chief market strategist at MDB Capital in New York.

“If layoffs begin in the next month or so, it will imply that his timing was too late,” he noted.

Bonds reacted favorably to the prospect of rate cuts, with yields on two-year Treasuries dropping to their lowest level since 2022.

What will the Federal Reserve’s rate cut look like?

On Friday, Fed Governor Christopher Waller stated that “the time has come” for the central bank to initiate a series of interest rate cuts, expressing flexibility regarding the extent and pace of these cuts.

The CME’s Fed watch tool indicates a 71% probability of a quarter-point reduction at the upcoming Fed meeting, while the likelihood of a half-point cut is estimated to be at 29%.

In 2022 and 2023, the Fed raised its key interest rate from near zero to a peak of 5.25% to 5.5% to combat inflation, and the rate has remained at this level since then.

Corporate news impacts stock performance

Shares of Broadcom fell 10% to $137.00 after the company projected fourth-quarter revenue forecast slightly below expectations due to decreased spending in its broadband segment.

Super Micro Computer’s stock dropped by 6.87%, closing at $386.46 after J.P. Morgan analysts downgraded its rating from overweight to neutral.

(Reuters contributed to this report.)