Stocks & NFTs
Global markets, including Wall Street, experienced a significant downturn on Monday due to concerns about a slowing U.S. economy, creating one of the most turbulent trading days in recent years. The Dow Jones Industrial Average had dropped more than 900 points (2.4 percent) by 2 p.m. Eastern Time. The broader S&P 500 fell by 2.8 percent, while the tech-heavy Nasdaq lost 3.4 percent as worries about artificial intelligence triggered a sell-off in tech giants like Nvidia and Microsoft.
This wave of unexpected market volatility was triggered by a series of disappointing economic indicators, including a labor report that showed the U.S. unemployment rate rising to 4.3 percent. Liz Young Thomas, head of investment strategy at SoFi, mentioned, “We’ve got a threefold fear — poor manufacturing data, weaker-than-expected labor market data, and a Federal Reserve that seemingly won’t intervene until September, which feels like an eternity away.”
The turmoil started in Asia, with Japan’s Nikkei 225 experiencing its most significant single-day drop on record, plunging 12.4 percent, or more than 4,451 points, to 31,458.42. This marked a fall of over 20 percent since its peak last month. Japan’s chief cabinet secretary, Yoshimasa Hayashi, stated, “We will watch the market trends with a sense of urgency and take all possible measures to manage the economy and finances,” during a press conference.
Other Asian markets followed suit: South Korea’s Kospi index dropped by 8.77 percent, Taiwan’s Taiex by 8.35 percent, Hong Kong’s Hang Seng Index was down by 1.46 percent, and China’s Shanghai Composite index decreased by 1.54 percent. Australia’s S&P/ASX 200 also slid by 3.7 percent.
In Europe, London’s FTSE 100 dropped more than 2 percent, hitting its lowest point in over three months. Shares of European tech and semiconductor stocks also saw sharp declines.
The root of this volatility lies in several U.S. economic reports that signaled potential weakness. The Labor Department reported on Friday that the nation’s unemployment rate had increased to 4.3 percent, with employers adding 114,000 jobs in July, falling short of expectations. Additionally, a report revealed an uptick in initial unemployment claims and a concerning indicator in the manufacturing sector.
Over the weekend, Goldman Sachs economists increased their recession forecast, raising the likelihood of a downturn in the next 12 months from 15 percent to 25 percent. Michael Farr of investment firm Farr, Miller and Washington said, “The fear is coming from the weak jobs numbers that indicate recession, and that the Fed stayed too high for too long.”
Despite these alarming developments, some analysts believe Monday’s sell-off may be an overreaction. “I understand that the labor market has been normalizing, but this is feeling like too much shock and awe,” Farr added.
Further exacerbating the situation was the two-year Treasury yield rising to 3.746, nearly matching the 10-year yield at 3.678. An “inverted” yield curve, where short-term yields exceed long-term yields, is often viewed as a harbinger of recession.
“At the beginning of the year, market sentiment was overly optimistic, with some banks prematurely calling for rate cuts. Now, we’ve swung to what may shape up to be excessive pessimism,” commented Ken Tjonasam, a portfolio strategist with Global X.
Tech stocks, which had previously surged on AI optimism, faced significant losses. Nvidia fell 6 percent, while Microsoft and Google dropped more than 2 percent, and Tesla declined by 3.5 percent. Apple’s stock plunged 4 percent following news that Warren Buffett’s Berkshire Hathaway had sold a substantial portion of its stake in the company.
Adding to the chaos, online brokerages like Charles Schwab, Fidelity, and Vanguard experienced outages, preventing many investors from accessing their accounts, according to Downdetector.
As markets continue to reel from these economic shocks, investors and analysts alike will be closely watching for signs of stabilization and guidance from the Federal Reserve.
