US stocks slide as global markets face sell-off

The global stock market is facing significant volatility as fears of a U.S. recession drive a widespread sell-off.

Key economic indicators in the U.S. are sparking panic among investors, leading to significant losses across major indices worldwide.

U.S. markets

• Dow Jones Industrial Average: Fell over 800 points, continuing a downward trend.
• Nasdaq: Experienced a 5.4% drop, with tech stocks like Nvidia and Apple facing steep declines.
• S&P 500: Declined by 4.2%, adding to concerns about the economic outlook.

Global repercussions

• Japan’s Nikkei 225: Plunged 12.4% on its worst day since the 1987 Black Monday crash, raising alarms about global economic stability.
• Europe’s Stoxx 600: Fell 2.6%, reflecting broader concerns across the continent.
• Safe-Haven investments: U.S. Treasury yields tumbled as investors flocked to safer assets, with the 10-year note yielding 3.76%.

Context: The turmoil began with disappointing U.S. economic data, including a weak jobs report and shrinking manufacturing activity. The “Sahm Rule,” a historically accurate recession indicator, is now in play, suggesting that the U.S. economy may be entering a recession.

The rule signals an early-stage recession when the three-month moving average of the jobless rate is at least a half-percentage point higher than its 12-month low.

State of play

Concerns about the Federal Reserve’s interest rate policy have intensified the sell-off. Despite market fears, the Fed recently chose to maintain interest rates at their highest levels in two decades. This decision has fueled anxiety that the central bank is behind in cutting rates to stimulate economic growth.

Tech stocks under pressure

• Nvidia: Tumbled 9% in Monday’s trading, extending a 23% decline from its recent highs.
• Apple: Suffered an 8% loss after Warren Buffett’s Berkshire Hathaway reduced its stake by half.
• Other Tech Losers: Tesla, Broadcom, and Super Micro Computer each dropped more than 7%.

Japan’s market crisis:

• Yen’s Role: The Japanese yen’s rise against the U.S. dollar has made Japanese assets more expensive, contributing to the sell-off.
• Government response: Japan’s finance minister, Shunichi Suzuki, assured that the Japanese economy remains robust, citing the highest wage increases in 33 years and strong capital investment.

Between the lines: The unwinding of the yen “carry trade” and shifts in global monetary policy are exacerbating market volatility. Investors are grappling with uncertainty as the economic landscape shifts rapidly.