In a turbulent week marked by economic uncertainty, Wall Street experienced a sharp decline on Friday, following a weaker-than-expected report on hiring in July. The unsettling data added to growing worries about the state of the economy and raised concerns that the Federal Reserve has been slow to cut interest rates.

The report, released by the Labor Department, revealed that employers in the U.S. added only 114,000 jobs in July, a significant drop from the average of 215,000 jobs added over the previous 12 months. Additionally, the unemployment rate rose to 4.3 percent, the highest level since October 2021.

The disappointing hiring numbers startled investors and intensified their focus on the risks facing the economy. The S&P 500 fell 2.4 percent, while the tech-heavy Nasdaq dropped 2.9 percent, reflecting the widespread anxiety across financial markets. Small stocks, government bond yields, and oil prices, which are all sensitive to economic expectations, also experienced declines.

The poor jobs report has prompted investors to reassess how aggressively the Federal Reserve should cut interest rates to counter weakening economic conditions. With concerns about a potential recession looming, markets are now anticipating a half a percent rate cut at the next Fed meeting in September, up from the previously expected quarter-point cut.

The bond market's reaction also reflected investor fears, as the two-year Treasury yield, which reflects short-term interest rate expectations, fell 26 basis points to 3.9 percent. Meanwhile, the 10-year U.S. Treasury yield, which influences many other borrowing costs, dropped to 3.81 percent, signaling concerns about a possible recession.

This week's volatility and the "sea change in psychology" among investors have been driven by hopes for interest rate cuts from the Fed. However, if those rate cuts are seen as a response to worries about economic growth, it could dampen sentiment. Investors are wary that the Fed might be late in taking action to prevent a downturn.

Global markets were also affected by the economic weakness, with the Nikkei 225 index in Japan falling 5.8 percent and Europe's Stoxx 600 index dropping 2.7 percent. Additionally, the international benchmark for crude oil experienced a 4 percent decline.

Aside from economic concerns, investors have also been reconsidering their stance on big technology stocks. Smaller companies, which are more sensitive to borrowing costs, have seen increased interest as investors shift their focus. There has also been a reevaluation of the growth prospects of tech giants like Microsoft, Nvidia, and Alphabet, after their significant stock price surges over the past year.

The underwhelming earnings reports from major tech companies further dampened sentiment towards the sector, with Amazon shares falling 10 percent and Intel shares dropping 27 percent, dragging down the Nasdaq.

Ultimately, the market's reaction to the jobs report and concerns about economic uncertainty highlight the delicate balance that the Federal Reserve faces in deciding when and by how much to cut interest rates. With additional upcoming economic data and another update on the job market before the September Fed meeting, sentiment could shift again. While the economy is still growing and the labor market remains relatively healthy, market turbulence has historically been short-lived. However, the current atmosphere of uncertainty and shifting investor sentiment continues to pose a significant challenge.