Stock market today: A worldwide sell-off whips back to Wall Street, and the Dow sinks 600 points on dismal jobs statistics.
Stock Market Today: Growing Fears of a Recession Cause the Dow to Drop 611 Points
US Stock Market Today
Fears that the US economy may be collapsing due to high interest rates intended to drive inflation sent stocks plunging on Friday.
For the first consecutive losses of at least 1% since April, the S&P 500 fell 1.8%. The sell-off in stocks swept back around the globe to Wall Street, causing the Dow Jones Industrial Average to lose 610 points, or 1.5%, and the Nasdaq composite to fall 2.4%.
Markets were shaken by a report that revealed hiring by US firms slowed last month by a significant amount, far more than economists had predicted. As a result, bond rates and stocks both dramatically declined. It came after a series of less positive than anticipated economic statistics the previous day, which included a deterioration in the manufacturing sector in the United States, which has been among the most negatively impacted by high rates.
Just a few days prior, Federal Reserve Chair Jerome Powell sent the most definitive signal yet that inflation has decreased sufficiently for rate cuts to start in September, which caused U.S. stock indexes to rise to their highest point in months.
Concerns are growing now. The Fed might have overreached itself by maintaining its main interest rate at a two-decade high. Rate reductions would facilitate borrowing for American businesses and people and stimulate the economy, but it would take several months or even a year for the full impacts to materialize.
The head economist at Annex Wealth Management, Brian Jacobsen, claimed that “the Fed is snatching defeat from the jaws of victory.” Rate cuts in September will come too little, too late because the economy’s momentum has slowed down so considerably. In order to prevent a recession, they will need to take action beyond the customary quarter-point reduction in the interest rate.
Based on statistics from CME Group, traders are currently betting on a 70% chance that the Fed will reduce its benchmark interest rate by half a percentage point in September. Powell stated on Wednesday that a significant cutback is “not something we’re thinking about right now,” despite this.
Naturally, the American economy is still expanding, so a recession is far from inevitable. Since it began raising rates abruptly in March 2022, the Fed has been very clear about the tightrope it is walking: being too soft would allow inflation to grow, but getting too aggressive would suffocate the economy.
Powell stated Fed officials “have a lot of room to respond if we were to see weakness” in the labor market after lifting its primary rate so high on Wednesday, before the depressing economic statistics came out. However, Powell refused to declare triumph on either the jobs or the inflation fronts.
According to Nate Thooft, senior portfolio manager at Manulife Investment Management, “the market is overreacting at this point and pricing in too much on rate cuts.” The job data from today undoubtedly supports the story of a faltering economy.
Before the dismal jobs news hit Wall Street on Friday, U.S. stocks already seemed to be heading for losses.
A number of significant tech firms released disappointing profit reports, extending a generally depressing trend that started last week with the announcements from Tesla and Alphabet.
After revealing lower-than-expected sales for the most recent quarter, Amazon saw an 8.8% decline. The tech and retail behemoth also provided a summer operating profit estimate that was below analysts’ estimates.
After Intel’s profit for the most recent quarter fell far short of expectations, the chip company saw its worst day in 50 years as it plunged an additional 26.1%. In addition, it stopped paying dividends and predicted a deficit for the third quarter when experts had predicted a profit.
Following the release of better-than-expected profit and revenue, Apple remained stable, rising 0.7%.
This year’s S&P 500 record breaking performance was mostly due to Apple and a small group of other Big Tech firms called the “Magnificent Seven.” This was partly due to a fervor surrounding artificial intelligence technologies. However, last month, concerns that investors had overpriced them caused them to lose momentum.
