Double whammy

When investors woke up this morning, the continuing story of a fruitless AI spending splurge looked set to ensure that markets ended the week on a down note.

• Then the jobs report hit.

Why it matters: The market's fading love affair with Big Tech has suddenly collided with a steady stream of worrying macro data — themes sure to dominate attention until the Fed's next rate decision in September.

State of play: Major stock indexes all fell hard today. The Dow fell over 600 points, or 1.8%, while the tech-heavy Nasdaq Composite shed 2.4%, ending the day in correction territory from its recent high on July 10.

• Amazon shares fell 8.8%, driven by its growing AI spending (at the expense of current profits) and a disappointing revenue outlook.
• Intel, the chipmaker, jolted markets as well, shedding 26% since yesterday's massive earnings miss and a message that it was laying off 15% of its employees and halting its Q4 dividend.

The big picture: But today's market route was bigger than tech — the Russell 2000, an index of U.S. small-cap stocks, fell 3.5%.

• That's notable, as the Russell had gained over 11% over the last month (see below👇) in part reflecting capital moving out of giant "Magnificent Seven" tech stocks and into the broader market.
• Today, the Russell's fall reflected investors' newfound recession fears.

Zoom in: For that, you can thank today's U.S. jobs report. Data showed the U.S. economy added 114,000 jobs in July, far fewer than expected, and a slowdown from the prior month's downwardly revised 179,000 job gains.

• The unemployment rate rose to 4.3%, up from 4.1% in June, and the highest since 2021.
• That set off alarm bells, Axios' Neil Irwin noted, on the back of separate data earlier in the week showing a slowdown in hiring and manufacturing activity and a spike in jobless claims.

The bottom line: Two days ago, the market cheered the Fed's signaling of a September rate cut. Today, Sept. 18 feels a long way off.