A global stock sell-off intensified this morning, with the Dow Jones Industrial Average plunging more than 1,000 points at the opening bell and Japan’s benchmark Nikkei 225 stock index recording its biggest single-day drop on record.
The Dow erased 2.8 percent, while the broader S&P 500 shed 3.6 percent. The tech-heavy Nasdaq plummeted 4.8 percent.
Analysts said the sell-off is a reaction to worrisome economic data last week, which sent the Nasdaq into correction territory Friday after nearly a year of steady gains. Even with the recent losses, all three major U.S. indexes are up for the year.
“Couple economic concerns with the cacophony of earnings disappointments and weak corporate outlooks, global unrest, and currency gyrations, and you have the recipe for sudden volatility,” Greg McBride, chief financial analyst at Bankrate, said in a note.
The turbulence also sent the CBOE VIX gauge, which is known as Wall Street’s “fear gauge,” to its highest intraday level since March 2020, up 172 percent.
The Nikkei index fell by 12.4 percent, or by 4,451.28 points, to 31,458.42. Other markets fell across the region: South Korea’s Kospi index by 8.77 percent; Taiwan’s Taiex by 8.35 percent; Australia’s S&P/ASX 200 by 3.7 percent; Hong Kong’s Hang Seng Index was down by 1.46 percent; and China’s Shanghai Composite stock market index by 1.54 percent.
European markets fell by about 2 percent in early trading Monday. London’s FTSE 100 dropped over 1.5 percent, hitting its lowest in over three months, Reuters reported, and shares of European tech and semiconductor stocks also plunged.
The volatility was sparked by several data reports that appeared to show weakness in the U.S. labor market.
The U.S. Labor Department reported Friday that the unemployment rate had spiked to 4.3 percent, with employers adding 114,000 jobs in July, a weaker-than-expected showing. On Thursday, another report showed more Americans filing initial unemployment claims – a widely-followed proxy for layoffs – and a gauge of the manufacturing sector also raised concerns.
Analysts said the recent economic data points revived fears of a possible U.S. recession. The Federal Reserve has substantially raised interest rates over the last two years to get inflation under control, raising concerns that it could slow the economy too much.
“The fear is coming from the weak jobs numbers that indicate recession, and that Fed stayed too high for too long,” said Michael Farr of the D.C.-based investment firm Farr, Miller and Washington.
Still, Farr said he thought the Monday sell-off could be an overreaction to a few weak economic data points. “I understand that the labor market has been normalizing, but this is feeling like too much shock and awe,” Farr said.
Other worrying economic signs could be found. The two-year Treasury yield reached 3.746, nearly reaching the 10-year yield at 3.678, according to MarketWatch. An “inverted” yield curve, in which short-term yields are higher than long-term yields, is a widely followed recession indicator.
Several leading tech stocks, whose valuations soared earlier in the year amid hype around artificial intelligence technology, were poised for steep losses Monday.
Apple lost 10 percent in premarket trading after reports that Warren Buffett’s Berkshire Hathaway had slashed its stake by half. Nvidia and Microsoft, seen as the darlings the artificial intelligence-driven rally, traded down 12 percent and 5 percent respectively. Tesla lost 8 percent.
The Nikkei 225 has slid by more than 20 percent since last month, after reaching all-time highs of over 42,000 points in July. The Nikkei dropped by 3,836 points – a nearly 15 percent fall – on Oct. 20, 1987, in the wake of the Black Monday Wall Street crash that year.
“We will watch the market trends with a sense of urgency and take all possible measures to manage the economy and finances,” Yoshimasa Hayashi, Japan’s chief cabinet secretary, said during his regular news conference Monday.
(c) 2024, The Washington Post · Aaron Gregg, Andrew Jeong, Niha Masih