Hedge fund manager Jonathan Honig of Capitalist Pig advises investors to focus on what’s working in the market right now, and it’s not Big Tech.
U.S. stock futures fell sharply on Monday as fears of a U.S. recession caused turmoil across global markets.
The Dow Jones Industrial Average fell more than 700 points, Nasdaq futures fell more than 4%, and the S&P 500 fell more than 2.5%.
The Nasdaq 100 and Nasdaq Composite indexes entered a correction last week due to weak employment data from China, the world’s largest economy, a decline in manufacturing activity and a bleak outlook for big technology companies.
Dow Jones Industrial Average
July jobs report sparks reliable recession indicator
The weak jobs data also triggered a phenomenon known as the “thumb rule,” which is seen by many as a historically accurate indicator of economic downturns.
“The July jobs report is being viewed as a warning sign of a recession and the market is reacting accordingly,” said Bill Adams, chief economist at Dallas-based Comerica Bank.
Traders work on the floor of the New York Stock Exchange during afternoon trading on March 27, 2024 in New York City. (Photo by Michael M. Santiago/Getty Images/Getty Images)
The unexpected rise in unemployment has now put the so-called Sarm rule into action. Named after former Federal Reserve economist Claudia Sarm, the rule has accurately predicted every economic downturn since 1970.
| Ticker | safety | last | change | change % |
|---|---|---|---|---|
| Me: DJI | Dow Jones Average | 39737.26 | -610.71 |
-1.51% |
| SP500 | S&P 500 | 5346.56 | -100.12 |
-1.84% |
| I:Comp | Nasdaq Composite Index | 16776.163609 | -417.98 |
-2.43% |
The standard stipulates that an economy is in the early stages of a recession if the three-month moving average of the unemployment rate is at least 0.5 percentage points higher than its lowest point over the past 12 months. The unemployment rate over the past three months has averaged 4.13%, 0.63 percentage points higher than the 3.5% recorded in July 2023, exceeding this standard.
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Major Wall Street brokerages also revised their 2024 Fed interest rate forecasts, signaling further policy easing from the central bank.
Japan’s stock market also fell on Monday, with the Nikkei Stock Average closing down more than 12 percent, its worst performance since 1987.
FOX Business’ Megan Henney and Reuters contributed to this report.
