Global Market: Dow Drops 1,000 Points, Nasdaq Dives 6%, S&P 500 Begins Trading Down 3.9%
In a sweeping global market rout, the Dow Jones Industrial Average plummeted 1,000 points, signaling a severe downturn. The Nasdaq faced a sharp 6% decline, while the S&P 500 opened 3.9% lower.
The tech sector bore the brunt of the sell-off, with Nvidia crashing nearly 14%, Apple dropping 6.4%, Meta falling 5.4%, and Amazon sliding by 6%. This widespread market decline highlights escalating investor anxiety amidst growing economic uncertainties.
Markets across Asia and Europe were also hit hard, and bond yields fell as investors flocked to safe-haven assets, anticipating that the U.S. Federal Reserve might need to implement aggressive rate cuts to stimulate economic growth.
The premarket session was particularly harsh, with the so-called Magnificent Seven stocks—once the primary drivers behind recent record highs—set to lose a combined $1.3 trillion in market value.
Apple’s shares tumbled 10% following Berkshire Hathaway’s decision to halve its stake in the tech giant, signaling that Warren Buffett might be growing cautious about the U.S. economy or inflated stock valuations.
Nvidia’s stock fell 14.3% after reports emerged of delays in its new artificial intelligence chips due to design issues. Microsoft and Alphabet also saw declines of nearly 6% each.
At 8:36 a.m. ET, Dow e-minis were down 1,257 points, or 3.15%, S&P 500 e-minis had dropped 247.5 points, or 4.6%, and Nasdaq 100 e-minis were down 1,155.25 points, or 6.23%.
The recent weak jobs report and declining manufacturing activity in the U.S., coupled with gloomy forecasts from major tech firms, pushed both the Nasdaq 100 and Nasdaq Composite into correction territory last week. Additionally, the disappointing jobs data triggered the “Sahm Rule,” a historically reliable recession indicator.
Traders are now assigning a 90.5% probability to a 50 basis point rate cut by the Federal Reserve in September, a sharp increase from the 11% chance predicted last week, according to CME’s FedWatch Tool.
Major Wall Street brokerages have also adjusted their 2024 Fed rate projections to reflect expectations of more significant policy easing.
“I doubt the Fed will go for a 50 basis point cut, as it would suggest they were wrong about the economic outlook, potentially heightening investor concerns rather than alleviating them,” said Sam Stovall, chief investment strategist at CFRA Research. “Instead, the Fed might opt for a 25 basis point cut to reassure the markets that they are addressing the issue.”
Yields on U.S. government bonds fell to multi-month lows, with the 10-year note at 3.6839% and the two-year at 3.6907%.
The CBOE Volatility Index, often referred to as Wall Street’s “fear gauge,” spiked to 62.64, surpassing its long-term average of 20 and reaching its highest level since April 2020.
Crypto-related stocks also suffered as Bitcoin dropped to its lowest level in five months. Coinbase Global fell 18.3%, while MicroStrategy and Riot Platforms experienced declines of 25.4% and 17.5%, respectively.
In contrast, Pringles maker Kellanova saw a 22.1% surge following reports that candy giant Mars might be considering a buyout of the company.
