Stock markets were hit by a global sell-off on Friday as weak US jobs growth stoked fears of a sudden downturn in the world’s largest economy.

The tech-heavy Nasdaq index dropped by more than 2.4%, dragged lower by Intel and Amazon, after the companies reported disappointing results.

Official data showed employers added 114,000 jobs in July, far fewer than expected, while the unemployment rate rose to its highest level in nearly three years.

The figures suggested the long-running jobs boom in the US might be coming to an end and drove speculation about when and by how much the Federal Reserve will cut interest rates.

Stock markets were already worried about high borrowing costs and unsettled by signs that a long-running rally in share prices, fuelled in part by optimism over artificial intelligence (AI), might be running out steam.

Friday’s decline in the Nasdaq brought the index down about 10% from its most recent peak – a fall known as a “correction” – that in this case has happened in a matter of weeks.

The Dow Jones Industrial Average also dropped 1.5% on Friday, and the S&P 500 ended 1.8% lower, after markets in Asia and Europe sank.

In Japan, the Nikkei 225 index tumbled nearly 6%.

Earlier this week, the Federal Reserve held interest rates again, but signalled it was likely to cut rates at its next meeting in September.

“Now the question isn’t will they [Federal Reserve] cut in September, but by how much,” said Jay Woods, chief global strategist at Freedom Capital Markets.

Seema Shah, chief global strategist at Principal Asset Management, said the latest jobs figures raised questions about whether the Fed had waited too long.

“Job gains have dropped below the 150,000 threshold that would be considered consistent with a solid economy,” she said.

“A September rate cut is in the bag and the Fed will be hoping that they haven’t, once again, been too slow to act.”

Friday’s report from the Labor Department showed the unemployment rate rising to 4.3% – the highest rate since 2021 and up from 3.5% a year ago.

Wage gains have also slowed, with average hourly pay rising just 3.6% over the last 12 months.

On Friday, shares in Amazon dropped by more than 10%, despite the e-commerce giant reporting sales growth of 10% in the most recent quarter.

The firm would be hit hard by any downturn in the US economy and also ran into investor scepticism about heavy AI spending.

Intel shares also plunged more than 27%, after the chipmaker warned it would need to take drastic action to restore growth, including cutting more than 15,000 jobs.

Benchmark crude oil prices, which can reflect expectations about economic growth, also fell nearly 3%.

The stock market turmoil has emerged in the middle of a heated US presidential campaign, which has raised the stakes for the Fed and opened its moves up to intense political debate.

Republicans have suggested that lowering rates would amount to helping Democrats, with the party’s presidential candidate Donald Trump saying a pre-election rate cut is “something that they know they shouldn’t be doing”.

But Fed officials have consistently argued that politics do not bear on their decisions over rates.

In a statement following the jobs figures, President Joe Biden said the economy was still making progress.

The US economy expanded at an annual rate of 2.8% this spring, bouncing back after a slump at the start of the year.

Last month’s uptick in the unemployment rate also appeared driven by a rise in people looking for work, rather than a sudden surge in job losses, analysts said.

Nancy Vanden Houten, lead US economist at Oxford Economics, said she thought the report was “overstating emerging weakness”.

“We aren’t dismissing the entire upward creep in the unemployment rate, but the economy is not in recession,” she said.