Global Stock Markets Tumble as Recession Fears Intensify

Nasdaq set to confirm correction as recession fears mount; Amazon, Intel slide | Taiwan News | Aug. 3, 2024 12:15

Aug 2 (Reuters) - The Nasdaq Composite was on track to fall into a correction in a Wall Street battering after Friday's weak jobs numbers deepened worries of a slowdown in the U.S. economy, while Amazon and Intel's downbeat forecasts worsened investor sentiment. The tech-laden index .IXIC slumped over 10% from its July peak, putting it on track to confirm it is in a correction after concerns arose about pricey Big Tech valuations and a cooling economy. "This isn't that unusual as we passed the economic torch from the perception of growth to needing government intervention with lower interest rates to stabilize the economy," said Tom Plumb, chief executive and portfolio manager at Plumb Funds. "As we go through the fall and start to see some impact of the Fed taking actions (on rate cuts), we can see a recovery from current levels to well over 18,000 points by year-end." At 11:51 a.m. the Dow Jones Industrial Average .DJI fell 833.37 points, or 2.07%, to 39,514.60, the S&P 500 .SPX lost 112.95 points, or 2.07%, to 5,333.73 and the Nasdaq Composite .IXIC lost 409.46 points, or 2.38%, to 16,784.69. The S&P 500 hit its lowest level since June 5. Both the benchmark index and the blue-chip Dow were on track for their biggest two-day slides in nearly two years. The nonfarm payrolls report showed the U.S. job market slowed sharply last month, while a separate reading revealed new orders for U.S.-manufactured goods fell more than expected in June, deepening fears about the health of the economy sparked by Thursday's weak manufacturing data. With fresh evidence of the labor market weakening, traders are now betting the U.S. Federal Reserve will deliver a half-percentage-point rate cut in September, versus the 25-bps cut expected before the data. "Now the question isn't will they cut in September, but by how much. With the Sahm rule officially being triggered, both the talk of recession and criticism of the Fed will grow louder," said Jay Woods, chief global strategist, Freedom Capital Markets. The Sahm rule is a historically accurate early indicator of recession. The small-cap Russell 2000 index .RUT slumped 4% to hit a nearly one-month low and was set for its biggest two-day slide since June 2022. Amazon.com AMZN.Ofell 9% after it reported slowing online sales growth in the second quarter and said cautious consumers were seeking cheaper purchase options. Intel INTC.O tumbled 26% after forecasting third-quarter revenue below estimates and suspending its dividend, starting in the fourth quarter. Other chip stocks were also set to extend Thursday's losses. Nvidia NVDA.Oand Broadcom AVGO.O lost 2% each, while Micron Technology MU.O and Arm Holdings ARM.O were down around 7% each. The Philadelphia SE Semiconductor Index .SOX hit a three-month low, set for its biggest two-day slide since March 2020. Bucking the negative trend in megacaps, Apple AAPL.O rose 2.3% after posting better-than-expected third-quarter iPhone sales and forecasting more gains, betting on AI to attract buyers. Disquiet about the dominance of the "Magnificent Seven" group of stocks persists as earnings from most of the Big Tech companies have failed to enthuse investors, underlining worries about their valuations being inflated. All the 11 S&P 500 sub-indexes slumped, with the Consumer Discretionary .SPLRCDsector leading losses and on track for its biggest two-day drop since June 2022. Major U.S. banks also fell for the second straight day on recession concerns, with the S&P 500 Financials .SPSY and Banks .SPXBK indexes losing 3% and 4.7%, respectively. Wall Street's "fear gauge" .VIX breached the long-term average level of 20 points to touch its highest mark since last March. Among other movers, Snap SNAP.N lost 24.7% after forecasting current-quarter results below expectations. Chevron Corp CVX.N fell 3.5% after the oil giant missed estimates for second-quarter profit. Declining issues outnumbered advancers by a 4.23-to-1 ratio on the NYSE, and by a 5.74-to-1 ratio on the Nasdaq. The S&P 500 posted 57 new 52-week highs and 15 new lows, while the Nasdaq Composite recorded 27 new highs and 248 new lows.

Stocks drop, Nasdaq confirms correction as recession fears mount

U.S. stocks dropped notably for the second day as a soft jobs report heightened recession worries. Nonfarm payrolls rose by just 114,000, missing expectations. The unemployment rate increased to 4.3%, near a three-year high. Major indices, including the Nasdaq, saw substantial declines, with market sentiment turning bearish.U.S. stocks sold off for a second straight session on Friday, and the Nasdaq Composite confirmed it was in correction territory after a soft jobs report stoked fears of an oncoming recession. The Labor Department said nonfarm payrolls increased by 114,000 jobs last month, well short of the 175,000 average forecast by economists polled by Reuters, and the at least 200,000 that economists believe are needed to keep up with population growth. The unemployment rate jumped up to 4.3%, near a three-year high. The data added to concerns the economy was slowing more rapidly than anticipated and the Federal Reserve had erred by keeping rates steady at its policy meeting that concluded on Wednesday. Expectations for a rate cut of 50 basis points (bps) at the Fed's September meeting jumped to 69.5% from 22% in the prior session, according to CME's FedWatch Tool "Obviously the jobs number is the big headline, but we seem to have officially entered at least a rational world where bad economic news is read as bad rather than bad economic news is read as good," said Lamar Villere, portfolio manager at Villere & Co. in New Orleans. "The Fed is going to cut and we're all sort of adjusted to that, that is sort of established. Now it's more like hey, did they wait too long? Do we have a recession on our hands?" The weak jobs data also triggered what is known as the "Sahm Rule," seen by many as a historically accurate recession indicator. The Dow Jones Industrial Average fell 610.71 points, or 1.51%, to 39,737.26, the S&P 500 lost 100.12 points, or 1.84%, to 5,346.56 and the Nasdaq Composite lost 417.98 points, or 2.43%, to 16,776.16. Adding downward pressure was drop in Amazon, down 8.79%, and Intel, which plunged 26.06% after their quarterly results and disappointing forecasts. The declines pushed the Nasdaq Composite down more than 10% from its July closing high to confirm the index is in a correction after concerns grew about expensive valuations in a weakening economy. The S&P 500 closed at its lowest level since June 4. Both the benchmark S&P index and the blue-chip Dow suffered their biggest two-day slides since March 2023. The small cap Russell 2000 index slumped 3.52% to close at a three-week low and saw its biggest two-day drop since June 2022. Chip stocks also continued their recent downdraft, and the Philadelphia SE Semiconductor Index closed at a three-month low after its biggest two-day slide since March 2020. Among the few bright spots, Apple rose 0.69% after posting better-than-expected third-quarter iPhone sales and forecasting more gains, betting on AI to attract buyers. Of the 11 major S&P 500 sectors, defensive names such as consumer staples, utilities and real estate were the only advancers, with the consumer discretionary sector leading declines as Amazon weighed heavily, for its biggest two-day drop since June 2022. The CBOE Volatility index, also known as Wall Street's "fear gauge," breached its long-term average level of 20 points to touch 29.66 its highest mark since last March 2023, before closing at 23.39. Some market participants viewed the sell off as a chance to pickup stocks at cheaper prices. UBS strategist Jonathan Golub said in a note to clients on Friday that market returns are greatest when the VIX is extended and represents a near-term buying opportunity. Declining issues outnumbered advancers by a 2.92-to-1 ratio on the NYSE, and by a 4.52-to-1 ratio on the Nasdaq. The S&P 500 posted 62 new 52-week highs and 15 new lows, while the Nasdaq Composite recorded 34 new highs and 297 new lows. Volume on U.S. exchanges was 14.75 billion shares, compared with the 11.97 billion average for the full session over the last 20 trading days.