Markets were due to open much lower as investors reacted to a bad jobs number and bad news from Intel (NASDAQ:INTC), Amazon (NASDAQ:AMZN), and other tech companies.
The economy added just 114,000 jobs in July, the unemployment rate rising to 4.3%. The June estimate also fell to 179,000 jobs. Economists had been expecting 185,000 new jobs.
Intel’s layoffs and Amazon’s lower guidance also helped drive stocks lower.
Soon after the jobs number came out, Nasdaq futures were down 1.62%, and S&P futures were down 1.04%.
AI Won’t Save You
The good news is that interest rates are falling, and the odds of a rate cut in September are improving. The rate offered on the 10-year Treasury bond fell below 4% on Aug. 1 and kept plunging after the jobs number. It was trading at 3.81% at 8:45 a.m. Bitcoin (BTC-USD) also rose by 1.8% overnight and was trading at $64,200.
Oil prices, meanwhile, were continuing to fall. West Texas Intermediate (WTI), the most common U.S. grade, was trying to hold $75 per barrel. The Dollar Index was down to 103.5 from 104 just before the jobs number came out.
The worst news may be in tech. There is a growing belief that the current direction of artificial intelligence (AI) isn’t just unsustainable. It’s unlikely to work. Current AI models are lousy at “outliers,” unusual facts not in the training set. That means a self-driving Tesla (NASDAQ:TSLA) may crash into an overturned semitrailer it doesn’t expect to see. ChatGPT may respond to an unexpected question with gibberish.
Major cloud vendors are now recognizing weaknesses in the models. Microsoft (NASDAQ:MSFT) now counts OpenAI as a competitor after investing $13 billion in the start-up.
If the brute force approach to AI doesn’t work, this is very bad news for Nvidia (NASDAQ:NVDA), whose AI processors drove the boom. Nvidia was trading at $102 in the pre-market, down almost 6% from its Aug. 1 close.
With Stocks Down Today: What Happens Next?
When things fall apart, they do so quickly. The markets will find their footing, but no one knows where that is. Until then, expect some panicky selling.
As of this writing, Dana Blankenhorn had a LONG position in MSFT, AMZN, and INTC. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor held a LONG position in NVDA and INTC.
