Wall Street’s main stock indexes fell sharply on Monday as concerns that the United States could fall into recession spread to global markets following weak economic data last week.
The blue-chip Dow Jones Industrial Average plunged more than 1,100 points after the open, while the tech-heavy Nasdaq Composite Index fell nearly 5 percent after entering a correction last week.
The decline followed broader selling overseas, where the Tokyo-based Nikkei stock average closed down 12.4 percent, its worst one-day drop since the infamous “Black Monday” crash of 1987. Meanwhile, European shares slumped to near six-month lows.
The pan-European STOXX 600 index fell 2.6 percent to 487.15 points, its lowest since February 13.
Shares in some of the world’s largest technology companies crashed early Monday morning.
Nvidia, Meta and Apple all saw their market capitalizations fall by 6%.
iPhone maker Apple is still reeling from Saturday’s announcement that billionaire investor Warren Buffett had halved his stake in the company, even though Buffett, CEO of Berkshire Hathaway, remains the company’s largest shareholder.
Last week, Buffett also sold $3 billion worth of shares in Bank of America.
Cryptocurrencies were also hit hard by Monday’s market crash, with Bitcoin falling more than 17% and Ethereum dropping more than 21%.
The global digital currency market has lost a total of $1.79 trillion in market capitalization over the past 24 hours.
The latest jobs report released last week showed hiring was growing at a slower pace than expected, raising concerns on Wall Street about a possible recession.
Analysts at investment bank Goldman Sachs on Sunday raised the chance of a recession next year to 25% from 15%, but warned that the risk was “limited”.
Weak employment data and a global stock market slump have also fueled analysts’ expectations that the Federal Reserve will step in and make emergency interest rate cuts in hopes of jumpstarting the economy.
A downturn would undermine the Fed’s plans to introduce gradual rate cuts as part of a “soft landing.” But the latest data has led some critics to accuse the central bank of not moving quickly enough to cut rates, even as signs of slowing inflation were apparent.
“The Fed is overdue for a rate cut, but it’s been a while since it last did so,” UBS economist Paul Donovan wrote in a client note Monday morning. Quoted by The New York Times.
“Policy mistakes are making things worse for low-income families.”
Before Monday, markets were pricing in a 78% chance that the Fed would not only cut rates in September, but also ease by 50 basis points.
Futures markets are forecasting a 122 basis point cut in fund rates from 5.25% to 5.5% this year, to around 3.0% by the end of 2025.
Dan Ives, managing director and senior equity research analyst for the technology industry at Wedbush Securities, said that despite the stock market crash, now is not the time to panic.
Ives told CNBC on Monday that the sell-off was caused by a “massive panic of fear,” but that investors “should see this as an opportunity.”
With post wire
