U.S. stocks plunged on Monday, part of a global sell-off, as investors braced for days of volatility due to growing concerns about a slowing U.S. economy and outsized gains in the technology sector.
The S&P 500 fell 3%, its biggest one-day drop since September 2022, and the tech-tracking index Nasdaq The 100 index fell a similar amount. Both benchmarks had pared earlier losses after a stronger-than-expected service sector report eased concerns about the economy.
Meanwhile, the VIX stock market volatility index spiked, at one point hitting its highest level since early 2020. The day’s volatility was a continuation of last week’s decline, after a weak U.S. jobs report raised concerns that the Federal Reserve was not acting quickly enough to prevent a severe economic downturn.
“There are a lot of people who have gotten too risk-on and short-term volatility and the game is now off,” said Matthew Rowe, head of cross-asset strategy at Nomura Capital Management. “There’s still a lot of uncertainty on many levels: monetary policy, geopolitics, the outcome of an election. And stocks are coming from a historically high valuation point.”
Large-cap tech companies were hit hardest by the losses, with the Bloomberg Magnificent 7 Index at one point posting its biggest drop since 2015 amid names including Nvidia Group and Apple Inc., both cutting losses on the day.
Concerns about the health of the US economy came into focus after data on Friday showed unemployment rose sharply in July, triggering a closely watched recession. index.
“With summer liquidity low, heavy trend plays still to be unwound and the VIX soaring, this sell-off could last for a few days,” said Florian Ielpo, head of macro research at Lombard Odier Asset Management. “However, the macro picture itself is not as bad as the market thinks.”
News about Warren Buffett’s Berkshire Hathaway be cut The company’s stake in Apple rose nearly 50% in the second quarter, also boosting risk-off sentiment in the tech sector. Slow monetization of AI tools — a long-standing concern for tech investors — continued as the first preview of Apple Intelligence fell short of expectations.
The AI supply chain has suffered another blow amid report Nvidia’s highly anticipated Blackwell chips will be delayed due to a design flaw. The chips could be delayed for three months or more, potentially affecting major tech companies from Meta to Microsoftnews information
“When sentiment starts to sour, the decline becomes more extreme than it could have been,” said Ben Barringer, an analyst at Quilter Cheviot. The next few weeks are likely to be very volatile for tech stocks, he said.
The turmoil in Japanese markets — where the central bank has begun raising interest rates as the Fed looks to cut — is also spreading across global markets across a range of asset classes. Investors are turning to inversions carry transactionin which they borrowed at lower interest rates in Japan to finance purchases of higher-yielding assets elsewhere. Japan’s Topix stock index has fallen 24% from its record high hit last month and the yen has soared.
“With the yen carry trades now being settled quickly, not only is the Japanese currency breaking a significant downward trend against all major currencies, but the risk assets used to finance those trades are also being sold off,” Asymmetric Advisors strategist Amir Anvarzadeh wrote in a note to clients.
Industries to pay attention to
- Shares of Apple suppliers fell after Berkshire Hathaway nearly halved its stake in the iPhone maker. The declines came amid a broader market sell-off on Monday. The Taipei-listed iPhone assembler Hon Hai Precision Industry Chip companies and manufacturers Taiwan Semiconductor Manufacturing The company has failed.
- The biggest US companies all fell, with Nvidia and Apple leading the Magnificent Seven in declines amid a sharp drop in overall stock prices.
- Shares of crypto-related companies fell sharply as Bitcoin fell another 13% last week, its worst decline since the collapse of exchange FTX.
- Packaged food stocks in focus after report that Mars is exploring acquisition Kellanova.T.D Cowen Analyst Robert Moskow writes that the merger of the two companies “could usher in another round of consolidation in the packaged food sector similar to the 1999-2001 period, driving up valuations.”
Market at a glance
- S&P 500 index down 3%
- Slope Jones Industrial Average down 2.6%
- Nasdaq Composite Index fell 3.4%
- Nasdaq 100 index down 3%
- The Russell 2000 index fell 3.3%
- The yield on the 10-year Treasury note fell 1.7 basis points
- CBOE Volatility Index up 13.80 points
- Bloomberg Dollar Index down 0.3%
- West Texas Intermediate crude rose 0.3% to $74 a barrel
- Euro up 0.4%
These are the most notable movers
- Nvidia shares fell 6% after a report said the company’s upcoming artificial intelligence chip will be delayed due to a design flaw.
- Apple shares fell 4.8% after Berkshire Hathaway reported on Saturday that it cut its stake in the company by nearly 50% as part of a major sell-off in the second quarter.
- Robinhood slides 8.2% as Bitcoin loses about a fifth of its value amid global sell-off.
- Kellanova jumped 16% after Reuters reported that Mars is exploring a possible acquisition of the snack maker, citing people familiar with the matter.
- Tyson shares rose 2.1% after the company reported adjusted third-quarter earnings per share that beat analysts’ average estimates.
Notes from the seller
- Modern The stock fell 3.3% after being downgraded from outperform to sector perform at RBC Capital Markets, with the analyst noting the downgrade reflected an “increasingly uncertain outlook.”
- Lockheed Martin The stock closed little changed after RBC Capital Markets upgraded the defense contractor to outperform from sector perform. The brokerage noted the upgrade reflected “an improving top-line outlook.”
- Vertex Pharmaceuticals was downgraded from weight to equal weight at Barclays Bank with analyst Gena Wang citing valuation. Shares fell 3.6%.
- Five9 fell 1.5% amid a broad sell-off even after receiving a double upgrade to buy from underperform at BofA, removing the only negative analyst rating on the software company.
- Infinera shares fell 2% after Rosenblatt Securities downgraded the digital optical telecommunications equipment maker to neutral from buy.
- Academy Sports & Outdoors slid after the retailer was downgraded to neutral from outperform at JPMorgan.
- Mobileye Global fell 4.9% after Daiwa Securities downgraded the auto supplier’s stock to neutral from buy.
Related market news
- Bottom Line: Just as the stock market began to celebrate the Federal Reserve’s first interest rate cut, it was hit by a perfect storm: unexpectedly weak economic data that stoked recession fears, disappointing corporate earnings and poor seasonal trends.
- European Stocks: European Stocks plunged, extending last week’s decline amid a sharp decline in global stock markets and a shift away from technology stocks that have fueled this year’s rally.
- Inside Asia: Most Asian currencies rose against the dollar, supported by dovish bets on the Federal Reserve and falling Treasury yields. The ringgit outperformed amid improving foreign bond inflows.
This story was produced with the support of Bloomberg Automation.
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