Stock Market Today: Dow Sinks 611 Points on Rising Recession Fears
Fears that the U.S. economy might collapse under the weight of high interest rates meant to whip inflation sent stocks plunging on Friday.
The S&P 500 lost 1.8%, marking the company’s first losses of at least 1% in a row since April. As a stock sell-off whipped all the way around the world and returned to Wall Street, Stock Market Today: Dow Sinks 611 Points on Rising Recession Fears the Dow Jones Industrial Average lost 610 points, or 1.5%, and the Nasdaq composite lost 2.4%.
Fear swept the markets, leading to sharp declines in bond yields and stock prices as a result of a report that revealed hiring in the United States slowed significantly more than economists anticipated last month. It came after a string of weaker-than-expected economic reports from the previous day, including a worsening of manufacturing activity in the United States, one of the most affected areas by high rates.
After Federal Reserve Chair Jerome Powell gave the clearest indication yet that inflation has slowed enough for cuts to begin in September, U.S. stock indexes jumped to their highest level in months just a few days ago.
Concerns are growing that the Federal Reserve may have held its main interest rate too high for two decades. Although the full effects of a rate cut could take anywhere from a few months to a year to seep into the economy, it would make it easier for businesses and households in the United States to borrow money.
Brian Jacobsen, chief economist at Annex Wealth Management, stated, “The Fed is seizing defeat from the jaws of victory.” A rate cut in September will be insufficient and too late given the extent of the slowdown in economic activity. They’ll need to accomplish an option that could be greater than” the customary cut of a fourth of a rate point “to deflect a downturn.”
According to data from CME Group, traders are now betting on a 70% likelihood that the Fed will cut its main interest rate by half a percentage point in September. Despite Powell’s statement on Wednesday that such a significant reduction is “not something we’re thinking about right now,” this is the case.
Obviously, the U.S. economy is as yet developing, and a downturn is a long way from a sureness. Since it began sharply raising rates in March 2022, the Federal Reserve has made it abundantly clear what a delicate balance it must maintain: Being too forceful would stifle the economy, yet going too delicate would give expansion more oxygen.
Powell stated that Fed officials “have a lot of room to respond if we were to see weakness” in the job market after hiking its main rate so high, despite refusing to claim victory on either the jobs front or the inflation front on Wednesday before the discouraging economic reports hit.
According to Nate Thooft, senior portfolio manager at Manulife Investment Management, “certainly today’s job data feeds the weakening economy narrative, but I believe the market is overreacting at this point and pricing too much in on rate cuts at this stage.” Although the economy is indeed weakening, I am not convinced that the data so far are conclusive.
Before the disappointing jobs report hit Wall Street on Friday, U.S. stocks appeared to be headed for losses.
After Tesla and Alphabet’s disappointing profit reports last week, several large technology companies issued disappointing profit reports this week.
After announcing lower-than-anticipated revenue for the most recent quarter, Amazon’s stock fell 8.8%. The tech and retail giant also underestimated analysts’ expectations for operating profit for the summer.
Intel dropped considerably more, 26.1%, for its most awful day in 50 years, after the chip organization’s benefit for the most recent quarter missed the mark concerning gauges. It also stopped paying dividends and said it would lose money in the third quarter, when analysts were expecting to make money.
After announcing revenue and profits that were higher than anticipated, Apple held steady, rising 0.7%.
The S&P 500 set dozens of records this year, in part due to the hype surrounding artificial intelligence technology, led by Apple and a select group of Big Tech stocks known as the “Magnificent Seven.” However, last month, they lost momentum due to concerns that investors had overvalued their prices.
Friday’s misfortunes for tech stocks hauled the Nasdaq composite 10% underneath its record set the month before. That degree of drop is what merchants call a “revision.”
While tech stocks were regressing, other sectors of the stock market that had been hampered by high interest rates began to rapidly rebound last month, particularly smaller companies, which was advantageous for Wall Street. However, they tumbled too Friday on stresses that a delicate economy could undermine their benefits.
More than the rest of the market, the Russell 2000 index of smaller stocks experienced a drop of 3.5 percent.
The S&P 500 lost 100.12 points to 5,346.56 all told. The Nasdaq composite fell 417.98 to 16,776.16 and the Dow fell 610.71 to 39.737.26, respectively.
In the security market, Depository yields fell strongly as brokers anticipated further slices to rates coming from the Central bank. The 10-year Treasury yield decreased from 4.70 percent in April to 3.79 percent as of late Thursday.
In financial exchanges abroad, Japan’s Nikkei 225 dropped 5.8%. Since the Bank of Japan raised its benchmark interest rate on Wednesday, it has struggled. The increase increased the value of the Japanese yen against the US dollar, which could hurt exporters’ profits and dampen a tourism boom.
Chinese stocks fell as financial backers enlisted dissatisfaction with the public authority’s most recent endeavors to prod development through different piecemeal measures, rather than expected implantations of more extensive boost, while stock records dropped by over 1% across quite a bit of Europe.
This week was also rough for commodity prices. After the assassinations of Hamas and Hezbollah leaders, speculation that an expanding conflict in the Middle East might halt the flow of crude fuel caused oil prices to soar.
However, worries that a weakening economy would result in a decrease in fuel consumption pushed prices down Thursday and Friday. After beginning the week above $77, a barrel of benchmark U.S. crude dropped back below $74 on Friday.
