*

US labor growth misses expectations; unemployment rate

rises

*

Bets rise for a 50 basis point Fed rate cut in September

*

Consumer Discretionary is worst-hit index

*

Indexes down: Dow 2.26%, S&P 2.4%, Nasdaq 2.8%

(Updated at 2:09 p.m. ET/1809 GMT)

By Chuck Mikolajczak

NEW YORK, Aug 2 (Reuters) -

U.S. stocks tumbled for a second straight session on Friday,

with the Nasdaq Composite on pace to confirm a fall into

correction territory after a soft jobs report stoked fears of an

oncoming recession.

The Labor Department said nonfarm

payrolls increased

by 114,000 jobs last month, well short of the 175,000 of

economists polled by Reuters, and the at least 200,000 that

economists believe are needed to keep up with population growth.

The unemployment rate jumped up to 4.3%, near a three-year high.

The data added to concerns the economy was slowing more

rapidly than anticipated and the Federal Reserve had erred by

keeping rates steady at its policy meeting that concluded on

Wednesday.

Expectations for rate cut of 50 basis points (bps) at

the Fed's September meeting

jumped

to 69.5% from 22% in the prior session, according to CME's

FedWatch Tool

.

"Obviously the jobs number is the big headline, but we

seem to have officially entered at least a rational world where

bad economic news is read as bad rather than bad economic news

is read as good," said Lamar Villere, portfolio manager at

Villere & Co. in New Orleans.

"The Fed is going to cut and we're all sort of adjusted

to that, that is sort of established. Now it's more like hey,

did they wait too long? Do we have a recession on our hands?"

The weak jobs data also triggered what is known as the

"Sahm Rule," seen by many as a historically accurate recession

indicator.

The Dow Jones Industrial Average fell 910.06

points, or 2.26%, to 39,437.91, the S&P 500 lost 130.49

points, or 2.40%, to 5,316.19 and the Nasdaq Composite

lost 481.00 points, or 2.80%, to 16,713.15.

Adding to the downward pressure was a tumble of nearly

10%% in Amazon ( AMZN ) and a plunge of more than 25% in Intel ( INTC )

after their quarterly results and disappointing

forecasts.

The declines pushed the Nasdaq Composite down more than 10%

from its July closing high to put it on track to confirm it is

in a correction after concerns grew about expensive valuations

in a weakening economy.

The S&P 500 hit its lowest level since June 5. Both the

benchmark index and the blue-chip Dow were on track for their

biggest two-day slides in nearly two years.

The small cap Russell 2000 index slumped about 4% to

hit a nearly one-month low and was set for its biggest two-day

slide since June 2022.

Chip stocks also continued their recent slide, with the

Philadelphia SE Semiconductor Index hit a three-month

low, poised for its biggest two-day slide since March 2020.

Among the few bright spots, Apple ( AAPL ) rose about 2%

after posting better-than-expected third-quarter iPhone sales

and forecasting more gains, betting on AI to attract buyers.

Of the 11 major S&P 500 sectors, only consumer staples

were higher, with the Consumer Discretionary

sector leading declines as Amazon ( AMZN ) weighed heavily, on pace for

its biggest two-day drop since June 2022.

Wall Street's "fear gauge" breached the long-term

average level of 20 points to touch 29.66 its highest mark since

last March 2023.

Among other movers, Snap plummeted about 25% after

forecasting current-quarter results below expectations.

Declining issues outnumbered advancers by a 3.5-to-1 ratio

on the NYSE, and by a 4.954-to-1 ratio on the Nasdaq.

The S&P 500 posted 58 new 52-week highs and 15 new lows,

while the Nasdaq Composite recorded 32 new highs and 268 new

lows.