Stocks dipped sharply on Monday, with the Dow Jones Industrial Average witnessing its worst day in almost two years because of concerns over the U.S. economy, triggering a global market sell-off.
The Dow went down to 1,033.99 points, or 2.6%, finishing at 38,703.27. The Nasdaq Composite dipped 3.43% to 16,200.08, while the S&P 500 went 3% to 5,186.33. Both the Dow and S&P 500 saw their largest daily losses since September 2022.
Japan’s stock market also witnessed its worst underperformance since Wall Street’s Black Monday in 1987, raising fears of global market turmoil.
The major cause of the global market meltdown was the fear of a U.S. recession, after an unexpected July jobs report that was released on Friday. There is also concern that the Federal Reserve is not doing well in cutting interest rates to combat the economic slowdown, as it decided to maintain rates at their highest in two decades last week.
Those who invested continued to take off megacap tech stocks and previously high-performing artificial intelligence stocks. Tech shares were among the hardest hit on Monday.
Nvidia went down 6.4%, pushing its decline from its 52-week high to nearly 29%. Apple dipped 4.8% after Warren Buffett’s Berkshire Hathaway cut its investment in the company to half. Other popular companies that lost included Tesla, down 4.2%, and Super Micro Computer, down 2.5%.
Japan’s stocks confirmed a bear market as investors in the Asia-Pacific region had their first opportunity to respond to the disappointing U.S. jobs report from Friday in Asia. The Nikkei dipped 12.4% to close at 31,458.42, marking its worst day since Wall Street’s Black Monday in 1987. The index’s loss of 4,451.28 points was also its largest in terms of points that have been recorded. The Dow lost over 22% in a single day on Black Monday.
Other global markets were also significantly impacted:
U.S. Treasury earnings went down due to recession fears and a flight to bonds as a global safe haven. Bond prices and yields move inversely.
The benchmark 10-year note yielded 3.78% on Monday, hitting its lowest level since June 2023. Bitcoin went from almost $62,000 on Friday to around $54,000 on Monday. Europe’s Stoxx 600 fell by 2.2%. The Cboe Volatility Index traded at 37.5 after climbing as high as 65, its highest reach since the early days of the COVID-19 pandemic in 2020.
Speculation about the unwind of the yen “carry trade” has added to the global market decline after the Bank of Japan raised interest rates last week. This move reduced the interest rate differential between Japan and the U.S., contributing to the yen’s rise in value against the dollar and ending a practice where traders borrowed cheap currency to buy other global assets.
Chicago Fed President Austan Goolsbee, while not committing to a specific course of action, suggested on CNBC’s “Squawk Box” on Monday that current interest rates might be too “restrictive.” He added that if economic conditions deteriorate significantly, the central bank will “fix it.”