Whether this is the correction investors have been waiting for could be made clear in the week ahead, after a weak jobs report added to fears of slowing growth and revised the monetary policy outlook. Stocks plunged to end the week after the July nonfarm payrolls report came in far below Wall Street estimates, implying that the strong labor market has finally faltered, after bolstering the U.S. economy amid persistent inflation and a historically aggressive rate-hiking cycle . On Friday, the tech-heavy Nasdaq Composite was on pace to close with a correction — down 10% from its recent high. The S & P 500 was headed for its worst day in roughly two years. Treasury yields also tumbled. At one point on Friday, the 10-year note yielded as little as 3.79%, falling to its lowest level since December and down from 4.20% last Friday. Investors expect that volatility could continue in the week ahead as markets increasingly price in the likelihood of an economic slowdown or maybe even a recession, only weeks after after the S & P 500 and Nasdaq Composite rallied to record highs in July. “A 10% pullback in the markets is not that unusual. We typically get one of those on average about once a year,” said Bill Hornbarger, investment chief at Benjamin F. Edwards. “I think the softer [economic] data is just a really good excuse for people to be taking profits.” As of Friday, the Nasdaq Composite was more than 10% below its recent high, while the S & P 500 was down by 6%. Small cap stocks, as represented by the Russell 2000 index, was more than 8% off its 52-week high. Recession fears rising The July jobs report released early Friday triggered a widely-followed recession indicator called the “Sahm Rule” after economist Claudia Sahm, which flashes when the three-month moving average of the U.S. unemployment rate is half a percentage point above the cycle low of the past 12 months. Appropriately, Wall Street’s “fear gauge” also leapt to its highest point since March 2023. In Friday’s selloff, the CBOE Volatility Index briefly approached 30. Meanwhile, Michael Kantrowitz, chief investment strategist at Piper Sandler, wrote in a note on Friday that lower rates are “no longer a bullish catalyst” for stocks, recommending allocating to higher quality stocks, with a preference for utilities. “We expect that we will see a positive correlation between interest rates and stock prices going forward,” Kantrowitz wrote. Others were more sanguine. Jan Hatzius, chief economist at Goldman Sachs, on Friday said he does not expect a recession, noting that the Federal Reserve has plenty of room to combat any economic softness given the federal funds rate currently stands at 5.25% to 5.50%. “They have 525 basis points of cuts” available to them, Hatzius told CNBC’s ” Squawk on the Street .” “And while I don’t expect the 50 basis point move at the next meeting, they could deliver a lot of easing if necessary.” Markets were last pricing in a 71% chance of a half percentage point rate cut in September, up from 22% on Thursday, according to the CME FedWatch Tool . Markets are now pricing the likelihood of five quarter percentage point cuts in 2024, which would lower the fed funds rate to 4.00% to 4.25%. “I think there is a case that needs to be discussed for going more quickly than the very glacial sort of normalization that is in the dotplot, but we will still get more information before the next [Fed policy] meeting,” Hatzius said. “So, we don’t have to make that decision right now.” Elsewhere, second quarter corporate earnings will continue next week with a spate of reports. Among the most notable names on tap are Walt Disney Company , Caterpillar , Costco, Eli Lilly and Super Micro Computer. Week ahead calendar All times ET. Monday Aug. 5 9:45 a.m. PMI Composite final (July) 9:45 a.m. S & P PMI Services final (July) 10 a.m. ISM Services PMI (July) Earnings: Simon Property Group , Diamondback Energy , Tyson Foods , Progressive Tuesday Aug. 6 8:30 a.m. Trade Balance (June) Earnings: Super Micro Computer , Fortinet , Devon Energy , Airbnb , Wynn Resorts , Axon Enterprise , TransDigm Group , Yum! Brands , Fidelity National Information Services , Uber Technologies , Marathon Petroleum , Caterpillar Wednesday Aug. 7 3 p.m. Consumer Credit (June) Earnings: Costco Wholesale , Warner Bros. Discovery , Occidental Petroleum , Ralph Lauren , CVS Health , Hilton Worldwide Holdings , Walt Disney Company Thursday Aug. 8 8:30 a.m. Continuing Jobless Claims (07/27) 8:30 a.m. Initial Claims (08/03) 10 a.m. Wholesale Inventories final (June) Earnings: Gilead Sciences , Akamai Technologies , Take-Two Interactive Software , News Corp. , Paramount Global , Expedia Group , Martin Marietta Materials , Eli Lilly & Co. Friday Aug. 9 No notable events.