Stocks ended sharply lower Monday, with the Dow sinking over 1,000 points, amid a global market rout tied to recession fears, overbought tech stocks and rising geopolitical risks.
The Dow Jones Industrial Average, tumbled 1,033 points, or 2.60%, to end the session at 38,703.27, while the S&P 500 dropped 3% to 5,186.33, and the tech-heavy Nasdaq lost 3.43% to finish the day at 16,200.08.
The Dow and S&P 500 posted their biggest daily losses since September 2022.
“We’re getting the pullback we anticipated but way faster than we expected,” Gina Bolvin, president of Bolvin Wealth Management Group. “How much does the market influence the Fed? Odds of an emergency rate cut is rising."
Investors should remember that fundamentals haven’t changed much, and Friday’s job report was one data point, however currency markets are important and can be a catalyst for the Fed to step in," she added.
Odds of a recession are rising, Bolvin said, noting that "investors need to take a deep breath: corrections are normal, and while unemployment is rising, it’s still historically low."
"The Fed can still stick this landing, but it is getting more difficult," she said. "While odds of a recession are rising, I don’t think we will see one this year because earnings are growing double digits."
Updated at 1:27 PM EDT
Paring declines
Stocks are coming off the worst of the early-session lows heading into the final hours of trading, with the S&P 500 down 128 points, or 2.4% and the Nasdaq falling 456 points, or 2.73%.
The Dow is still down around 890 points for the session, with benchmark 10-year note yields rising to 3.798% following the stronger-than-expected ISM data from earlier this morning.
GOLDMAN DESK:
— Carl Quintanilla (@carlquintanilla) August 5, 2024
“.. orderly and constructive .. We do NOT think today’s scary [price] action is a canary in the coal mind in regards to end of this bull mkt. Mkt should trend higher over remainder of session w/ the #ISM hurdle cleared. Flows over the first 120 mins have been very…
Updated at 12:19 PM EDT
Back to earnings - by Liam Elias
Investors will have a chance to refocus on corporate earnings this week as the second quarter reporting season draws to a close amid the current market turmoil
Around 78 S&P 500 companies are expected to post June quarter updates this week, including Caterpillar (CAT) , CVS Health (CVS) , Disney (DIS) and Eli Lilly (LLY) .
With just over 75% of the S&P 500 reporting so far this season, second quarter profits are forecast to rise 12.9% from last year to a share-weighted $50%, $504.1 billion.
That rate is likely to slow to 6.8%, however, over the three months ending in October, although the share weighted total will improve to $518.9 billion.
Tuesday’s earnings slate will include biotech Amgen (AMGN) , which reports before the bell and is expected to see its bottom line nearly double from last year to $5.01 per share on revenues of $8.33 billion.
Global economic bellwether, Caterpillar, meanwhile, is expected to see overall sales decline 4% from last year to $16.68 billion, with a bottom line of $5.54 per share. Caterpillar, which warned in the spring of a second quarter sales decline, lifted its quarterly dividend by 8%, to $1.41 per share, in June.
Ride-hailing group Uber Technologies (UBER) also reports before the bell just weeks after it won a major court decision in California that classified app-based workers as independent contractors, not workers entitled to benefits and protections.
Uber is expected to post adjusted earnings of 31 cents per share on revenues of $10.57 billion.
Stay ahead of the market with these reports!🔥 #EarningsCalendar pic.twitter.com/w36rdtPLOi
— uSMART (@usmartsg) August 5, 2024
Updated at 11:05 AM EDT
Carry on selling
There are a host of reasons why the markets are in a tailspin Monday, ranging from interest rate risks to a record tech selloff.
One of more frequently-mentioned factors, however, is the unwinding of the so-called 'yen carry trade', triggered by Bank of Japan rate hikes and a strengthening currency.
"Concerns have risen that the US economy is seeing a rising risk of recession at the same time as the Bank of Japan has begun to raise rates, effectively stymying the popular carry trade which saw investors borrowing cheaply in yen to invest overseas," said Lindsay James, investment strategist at Quilter Investors.
“Ultimately this period of outsized volatility against what remains a reasonably solid economic backdrop should present a buying opportunity for long-term investors," James added.
Related: Black Monday on Wall Street: 5 reasons stocks are plummeting
Updated at 10:08 AM EDT
Growth relief
The Institute for Supply Management's closely-tracked reading of service sector activity, the most important driver of U.S. economic growth, came in firmly ahead of forecasts for last month, providing some much-needed relief for the plunging stock market.
The headline ISM reading rose to 51.4 points last month, well below the 50-point mark that separates growth from contraction and Wall Street's 50.4 point forecast.
Benchmark 10-year note yields jumped 5 basis oints to 3.767% while 2-year note yields rose 8 basis points to 3.863%
Stocks remain firmly in the red, with the S&P 500 down 138 points, or 2.6% and the Nasdaq down 524 points, or 3.13%.
Yet another contraction one-off for the Services @ISM® Report On Business®: The Business Activity, New Orders and #Employment indexes returned to expansion territory in July, as did the PMI®; the reading of 51.4% is a 2.6-point increase. https://t.co/cDeawSZ1FU #ISMPMI #economy
— Institute for Supply Management (@ism) August 5, 2024
Updated at 8:48 AM EDT
The Wall (Street) comes tumbling down
The S&P 500 was marked 200 points lower, or 3.74%, in the opening minutes of trading, with the Nasdaq falling 844 points, or 5.02%.
The Dow, meanwhile, plunged 1,150 points as the small-cap Russell 2000 fell 77 points, or 3.51%.
Benchmark 10-year note yields slipped another 3 basis points to 3.718%, with 2-year notes pegged at 3.781%
S&P 500 Opening Bell Heatmap (Aug. 05, 2024)$SPY -4.06%🟥$QQQ -5.54% 🟥$DJI -2.66%🟥$IWM -5.47%🟥 pic.twitter.com/ebRREHglJr
— Wall St Engine (@wallstengine) August 5, 2024
Updated at 8:45 AM EDT
Normal curvature
A big move in the Treasury bond markets this morning has benchmark 2-year note yields, which are most-sensitive to changes in Fed rate policy, falling below 10-year note yields for the first time in more than two years.
The move marks the end of the longest "inversion" of the U.S. Treasury yield curve on record and is adding to concerns of a near-term recession in the world's biggest economy.
The longest yield curve inversion in history (758 days) is close to ending today w/ the 10-year Treasury yield now only 0.08% lower than the 2-Year Treasury yield. Historically, the flip back to a positive sloping curve after a long inversion has occurred near a recession. pic.twitter.com/pfqJzAuu0h
— Charlie Bilello (@charliebilello) August 4, 2024
Updated at 8:26 AM EDT
Nasdaq 1000 - not the good one
The Nasdaq is set to fall more than 1,000 points at the start of trading, based on U.S. futures prices and their fair value counterparts, with the S&P 500 called 223 points to the downside.
The Dow Jones Industrial Average, meanwhile, is set for a 1,153 point opening bell slump, with a 9% pullback for Apple likely leading declines.
The perfect storm hits market and what comes next. #Equity market update from @petergarnry https://t.co/U8zZYMjArX via @saxobank
— Ole S Hansen (@Ole_S_Hansen) August 5, 2024
Updated at 7:53 AM EDT
Nvidia crumbles
Nvidia shares slumped in premarket trading, and look set to tumble into bear market territory, as investors unwind holdings in the AI chipmaker amid reports of a delay in its new Blackwell processors.
Nvidia shares were last seen 12.7% lower in premarket trading to indicate an opening bell price of $93.73 each.
Related: Nvidia stock tumbles in tech slump amid questions over key chip
Updated at 6:50 AM EDT
Fear Spike
CBOE Group's VIX index, Wall Street's go-to volatility gauge, is moving sharply higher in early Chicago trading, rising nearly 170% and topping the $50 mark for the first time in four years.
That suggests traders are expecting daily swings of around 3.12% for the S&P 500 each day for the next month.
$VIX This is wild. This is 10 year chart of volatility. A move to 50 was not on my bingo card. See that in comparison to covid spike. pic.twitter.com/3Bhn5WNyOd
— JaguarAnalytics (@JaguarAnalytics) August 5, 2024
Stock Market Today
Stocks in Japan were wiped out last night, with the Nikkei 225 falling 12.4% and suffering its biggest single-day decline since the Black Monday collapse of 1987 as investors dumped risky trades and fled to safe-haven assets.
JUST IN 🚨: Japanese Stocks suffer largest decline since Black Monday 1987 pic.twitter.com/XbURmJOxhI
— Barchart (@Barchart) August 5, 2024
Benchmark 10-year Treasury note yields hit a mid-2023 high of 3.723% in overnight trading, and were last marked 5 basis points lower from their Friday close at 3.741% heading into the New York session.
Wall Street's fear gauge, meanwhile, surged more than 125% in after-hours trading to the highest level since the depths of the pandemic, with the CBOE Group's VIX index last marked at $41.89.
That level suggests traders expect the S&P 500 to endure daily moves of around 115 points each day for the next 30 days, more than triple the volatility price into markets in early July.
"It feels like the perfect storm triggered by the Fed rate decision last week followed by a US jobs report that recalibrated the market’s assessment of a recession," Saxo Bank strategists wrote. "This was the trigger. The rest is mechanical trading decisions based on risk."
"The turmoil will give the long-term investor some excellent opportunities which we will write about this week," they added.
Concerns that a U.S. recession, tied to a Fed policy error that left rates too high for too long, is also hammering global oil prices, have Brent crude-oil contracts falling to the lowest levels since late spring.
Related: Jobs report triggers key recession warning signal as stocks plunge
The U.S. oil-pricing benchmark, WTI futures, which is tightly linked to domestic gasoline prices, were marked $1.31 lower at $72.21 a barrel for September delivery.
The Fed left its benchmark lending rate unchanged at between 5.25% and 5.5% last week, and wouldn't commit to a September rate cut. The decision came just days before a weaker-than-expected reading for July manufacturing activity and softer jobs-market data that included the highest unemployment rate in four years.
The longest yield curve inversion in history (758 days) is close to ending today w/ the 10-year Treasury yield now only 0.08% lower than the 2-Year Treasury yield. Historically, the flip back to a positive sloping curve after a long inversion has occurred near a recession. pic.twitter.com/pfqJzAuu0h
— Charlie Bilello (@charliebilello) August 4, 2024
Markets were also on edge amid rising military tensions in the Middle East. U.S. officials are urging Americans to leave Lebanon and Israel is bracing for a possible retaliatory attack from Iran and Hezbollah following the killing of a senior Hamas leader last week in Tehran.
On Wall Street, tech stocks look set to take the brunt of the expected selloff, with futures contracts tied to the Nasdaq suggesting a 770-point plunge at the start of trading.
Futures tied to the S&P 500, meanwhile, are priced for a 140-point decline while the Dow Jones Industrial Average is called 690 points lower to kick off the week.
Related: After the Fed tipped markets over, now what?
Apple (AAPL) shares were a notable premarket decliner, falling 8.44% to $201.30 following news over the weekend that the billionaire investor Warren Buffett had dumped nearly half his stake in the tech giant last quarter.
More Wall Street Analysts:
- Analyst revisits Nvidia stock price target after Blackwell checks
- Analysts prescribe new Walgreens stock price targets after earnings
- Analyst revises Facebook parent stock price target in AI arms race
In Europe, the regionwide Stoxx 600 was marked 2.6% lower in Frankfurt, while Britain's FTSE 100 slumped 2.2% in London.
Overnight in Asia, Japan's Nikkei 225 lead a regional slump that pulled the MSCI ex-Japan benchmark 4.11% lower into the close of trading with stocks in Tokyo tumbling into bear market territory following Monday's meltdown.
Related: Veteran fund manager sees world of pain coming for stocks
