Wall Street’s main indexes tumbled on Monday, as fears of the United States tipping into recession following weak economic data last week rippled through global markets.
The Dow Jones Industrial Average fell 681.07 points, or 1.71 per cent, at the open to 39,056.19.
The S&P 500 opened lower by 195.42 points, or 3.66 per cent, at 5,151.14, while the Nasdaq Composite dropped 1,063.63 points, or 6.34 per cent, to 15,712.53 at the opening bell.
US stock index futures fell, with those tied to the Nasdaq sliding almost 5 per cent.
Bourses from Asia to Europe took a beating and bond yields slid as investors rushed to safe-haven assets and bet the US Federal Reserve would need to cut interest rates quickly to spur growth.
All megacap and growth stocks, the main drivers for the indexes hitting record highs earlier this year, fell sharply in premarket trading.
Apple slumped 8.4 per cent after Berkshire Hathaway slashed its stake in the iPhone maker by almost 50 per cent, suggesting that billionaire investor Warren Buffett is growing wary about the broader US economy or stock market valuations that have gotten too high.
Nvidia slid 9.7 per cent after reports of a delay in the launch of its upcoming artificial-intelligence chips due to design flaws. Microsoft fell 4.7 per cent, while Alphabet slid 6 per cent.
A weak jobs report and shrinking manufacturing activity in the world’s largest economy, coupled with dismal forecasts from the big US technology firms, pushed the Nasdaq 100 and the Nasdaq Composite into a correction last week.
Traders now see a 98.5 per cent probability that the US central bank will cut benchmark rates by 50 basis points in September, compared to an 11 per cent chance seen last week, according to CME’s FedWatch Tool.
Big Wall Street brokerages also revised their Fed rate projections for 2024 to show greater policy easing by the central bank.
“I am reluctant to believe the Fed would start the easing process with a 50 bps cut, but if the next seven weeks of data are consistent with this week’s, the Fed should be aggressive,” said Ronald Temple, chief market strategist at Lazard.
Yields on US government bonds hit multi-month lows, with the 10-year note last at 3.7379 per cent, while the two-year slipped to 3.7561 per cent.
The CBOE Volatility index, also known as Wall Street’s “fear gauge”, breached its long-term average level of 20 points last week and was currently at 53.11, highest since April 2020.
A slew of Fed officials will speak on the economy and monetary policy through the week and any indication on interest rate cuts could soothe frayed nerves of investors.
Chicago Fed President Austan Goolsbee and San Francisco Fed President Mary Daly are slated to speak later in the day.
Futures tracking small-cap index Russell 2000 dipped 4.9 per cent.
Crypto-linked stocks fell after Bitcoin hit its lowest in five months. Coinbase Global was down 13 per cent, while MicroStrategy and Riot Platforms were down 15.8 per cent and 12.2 per cent, respectively.
Big US lenders were down, with Bank of America leading the losses with a 4.5 per cent fall.
The safe haven yen and Swiss franc surged, as crowded carry trades unravelled, sparking speculation that some investors were unloading profitable trades to get money to cover losses elsewhere.
Such was the torrent of selling that circuit breakers were triggered on stock exchanges across Asia.
Japan’s benchmark Nikkei average closed 12.40 per cent lower at 31,458.42, its largest one-day fall since October 1987, while the broader Topix lost 12.48 per cent to 2,220.91.
European shares fell to near six-month lows amid a global selloff in equities on fears of a slowdown in U.S. economic growth, with only a handful of stocks trading in the green.
The pan-European Stoxx 600 index was down 2.6 per cent at 487.15 points, its lowest since February 13th.
The Euro Stoxx volatility index jumped 5.7 points to 30.26, its highest since March 2023.
Germany’s Dax, France’s Cac 40, Britain’s FTSE and Spain’s Ibex 35 all fell more than 2 per cent.
Treasury bonds were in demand, with US 10-year yields hitting at one point 3.723 per cent, the lowest since mid-2023. – Reuters
