The Dow Jones Industrial Average fell more than 1,000 points on Monday and has been sluggish ever since. (iStock )
Surprising employment data released last week, combined with a volatile Japanese market, led to a major sell-off on Monday’s trading day, sending both the Dow Jones Industrial Average and the S&P 500 to their worst closes since 2022.
The Bureau of Labor Statistics’ latest jobs report showed the number of employed persons increased by only 114,000, a sharp decline from the previous month’s increase of 206,000. This sharp slowdown in hiring has led to growing concerns about an economic recession. The sell-off that was mainly caused by this report was Uncomfortable parallels with the market crash Examples include the Black Monday stock market crash of 1987 and the 2008 financial crisis.
The drop in new job openings, along with the unemployment rate surging to 4.3% in July, added to the growing anxiety that led to turmoil on Monday. The Dow Jones Industrial Average fell more than 1,000 points, or 2.6%, while the S&P 500 fell 3%.
Stocks recovered slightly on Tuesday as recession fears eased and Japanese stocks rebounded. The Dow Jones Industrial Average rose more than 294 points and the S&P 500 rose 1.04%, ending a three-day market decline. The rebound in Japanese stocks also helped global markets recover, with the Nikkei rising 10.2% to its highest level since October 2008. On Monday, the Nikkei fell 12.4%.
On Wednesday, the Dow Jones Industrial Average ended its gains from the previous day, closing down 234 points, while the S&P 500 also fell again, down 0.8%.
Are you struggling with debt and fearing a possible economic downturn? Consolidate your debts into a low-interest loan and get out of debt now. Visit Credible to compare debt consolidation options and find the best personal loan interest rates based on your credit score and credit history.
Why inflation is causing many Americans to delay retirement: Study
Market turmoil could be good for interest rate cuts
Despite a tough week for the stock market, the jobs report virtually guaranteed that the expected interest rate cuts will go ahead in September, Melissa Cohn, regional vice president at William LaVais Mortgage, said in a statement.
Consumers have been waiting for these rate cuts to begin borrowing again, but they should expect the initial cuts to be modest: if the Fed cuts rates multiple times by the end of the year, consumers may see more volatility in interest rates.
“And we need to remember that mortgage rates don’t change when the Fed cuts rates,” Kohn said. “Mortgage rates go down. Student loans, auto loans, all interest rates go down every time the Fed cuts rates. But mortgage rates are tied to the bond market, and the bond market is much more closely tied to inflation and worsening economic data than the fed funds rate is.”
If you’re considering buying a home, consider visiting Credible to find the best mortgage rate for your financial situation.
Mortgage payments surge for homebuyers in battleground states: REALTOR.COM
Economists can’t tell if the U.S. is heading for a recession
This week’s ups and downs in the markets have created a complicated picture of where the economy is headed, with economists divided on whether this means the U.S. is heading for a recession.
The rise in the unemployment rate to 4.3% triggered an economic rule known as the thumb rule, which states that a half-percentage point jump in the unemployment rate within 12 months typically signals that a recession is on the way.
But despite this indication, it’s “highly doubtful” a recession has begun, said Adam Schickling, senior economist at Vanguard. SaidThere are conflicting reports about what prompted Sickling to make this statement.
“A significant and persistent mismatch between household and establishment surveys has created a unique paradox in which the unemployment rate is set to rise by 60 basis points since July 2023, even as job creation in the establishment surveys outpaces labor force growth,” Schickling explained.
Fears of a recession may simply be an overreaction to a bad week for markets and a sluggish month for hiring. According to some economistsStill, if the job market continues to weaken, this could be a cause for concern.
Get ahead of your debt by consolidating your debt into a low-interest personal loan. You can also enter some basic information into Credible’s free online tool to determine if a debt consolidation loan is the best option for you.
Americans agree something must be done to protect Social Security: Survey
Do you have a finance-related question but don’t know who to ask? Email a trusted money expert email address: Your question might be answered in Credible’s Money Expert column.
