Major stock indexes fell sharply on Monday morning as concerns grew that the U.S. economy was heading for a severe economic downturn.
The drop underscores the extent of investor concern after economic data released last week showed a sharper-than-expected rise in unemployment and slower job growth. Surveys of manufacturing also showed a sharp decline in activity in the sector, which is often a bellwether for the economy.
The Labor Department said the economy added just 114,000 workers in July, well below the 180,000 expected. Surveys of executives known as purchasing managers by the Institute for Supply Management and S&P Global both showed factory activity contracted in the month.
The Dow Jones Industrial Average fell 2.3% after the open. The Nasdaq Composite Index plunged 4%. The S&P 500 dropped 3.1%. The Russell 2000 index of mid-cap companies dropped 5.1%.
The Cboe Volatility Index (VIX), also known as the “fear index,” has been surging. Before Friday’s spike, the VIX had been below its historical long-term average of 20 for 190 consecutive days, the longest period it had remained below the average since 2018. It hit 55 on Monday morning, its highest level since the worst of the pandemic.
The federal funds futures market, a derivative that allows investors to speculate on Federal Reserve monetary policy, suggests there’s nearly a 90 percent chance that the Fed’s target rate will be half a percentage point lower than the current benchmark after its September meeting. That could mean a larger-than-usual 50-basis-point cut at that meeting or even a highly unusual cut outside of the Fed’s scheduled August meeting.
Politics may be at play: Vice President Kamala Harris’ approval ratings are rising and some election forecasters are predicting she will narrowly win the November election. Markets rallied in the months when Trump was expected to win.
