Stocks fell sharply on Monday morning as growing concerns about the strength of the U.S. economy and the outlook for microchip production spooked Wall Street.
The Dow Jones Industrial Average plunged 2.8% after trading on Monday, opening 1,100 points lower. Dow futures were down more than 1,200 points before the market opened on Monday.
The tech-heavy Nasdaq Composite Index plunged 6.2% after the market opened, while the S&P 500 Index fell 4.2%.
“The United States is the locomotive of the global economy, and growing concerns about a slowdown or even a possible recession are roiling markets around the world,” Bankrate chief financial analyst Greg McBride said in an analysis on Monday.
Global markets have rebounded since Friday after the federal jobs report for July came in much weaker than expected.
The US added just 114,000 jobs in July, and the unemployment rate rose to 4.3%, according to the Labor Department, below the 175,000 new jobs and 4.1% unemployment rate that economists had predicted.
The July jobs report came after a series of weak second-quarter earnings reports from major companies, including chipmaker Intel, which announced plans to cut jobs.
And Berkshire Hathaway Chairman Warren Buffett nearly halved his holdings of Apple shares, further deepening concerns about the tech company’s prospects.
“While Friday’s jobs report was disappointing, it’s not the only worrying economic indicator, it’s just the latest,” McBride said.
“When you add economic concerns to the cacophony of disappointing earnings, weak corporate prospects, global uncertainty and currency fluctuations, you’re bound to see sudden volatility.”
Weak July jobs data raised concerns among investors and some policymakers that the Federal Reserve, which held off on cutting interest rates on Wednesday, should have done so already after months of subdued inflation.
“Fed Chairman [Jerome] “Chairman Powell made a serious error by not lowering interest rates,” Sen. Elizabeth Warren (D-Mass.) said in a post on X on Friday.
“He has been warned many times that if he waits too long, he risks ruining the economy.”
Top U.S. economic policymakers sought to assure the public on Monday that the stock market’s sharp decline is not cause for widespread fears of a recession.
Chicago Federal Reserve Bank President Austin Goolsby acknowledged that while the U.S. does not appear to be in a recession, the Fed’s current range of interest rates may be too high.
“You shouldn’t overreact to one month’s number, but if it’s a sign of something happening longer term, you should respond depending on what those forces are,” Goolsby said Monday morning on CNBC’s “Squawk Box,” referring to the July jobs report.
“We need to be very restrictive and we should only impose these restrictions if we think the economy is overheating.”
McBride also urged caution amid market volatility.
“Retail investors need to be reminded that market volatility is common and, on average, declines of 10% tend to occur every 12 months,” he said.
The sell-off comes about three months before an election in which the economy is likely to play a major role.
Former President Trump took to the news Sunday night to slam President Biden and Vice President Harris.
Harris, who won the Democratic presidential nomination last week, already faced the challenge of selling her administration’s economic record. Despite three years of record job gains and robust economic growth, high inflation has put a strain on many American families and weighed on Biden’s views of his handling of the economy.
Updated 9:39 a.m.
