As the global market experiences a deepening selloff in riskier assets, investors are turning to the safety of bonds amidst mounting concerns about a potential slowdown in the world’s largest economy. From New York to London to Tokyo, equities are plummeting, with the S&P 500 on track for its most significant decline since September 2022.
The high-flying tech sector has been hit particularly hard, with megacap stocks like Nvidia Corp. and Apple Inc. seeing almost a 10% drop at one point. Despite data indicating growth in the US services sector, worries about a broader economic slowdown persist.
Just when stock markets appeared to be optimistic about signals from the Federal Reserve regarding a rate cut, they were blindsided by a perfect storm of weak economic data, lackluster corporate earnings, and unfavorable seasonal trends. At one point, the swap market was pricing in a 60% chance of an emergency rate reduction by the Fed in the coming week.
Experts like Callie Cox from Ritholtz Wealth Management caution that while the economy isn’t in crisis yet, it is entering a danger zone. The Fed must acknowledge the cracks in the job market to avoid falling behind the curve. The wave of selling reached a frenzy in Japan, with the Topix stock index experiencing its most significant three-day drop on record.
In the US, the S&P 500 and Nasdaq 100 both posted significant losses, with tech giant Nvidia tumbling due to reported delays in its artificial intelligence chip release. Berkshire Hathaway’s massive reduction in its Apple stake only added to the risk-off sentiment on Wall Street.
Amid the market turmoil, Treasury yields declined, and the dollar weakened as expectations of Fed easing grew. Cryptocurrencies also suffered losses, with Bitcoin dropping over 16% at one point. The market volatility has raised concerns about a potential economic slowdown among prominent Wall Street bears.
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