International
Fears of US recession cause international markets to plummet
U.S. stocks suffered their third straight day of sharp declines as recession fears continued to grow and Wall Street abandoned a popular trade that had helped counter high interest rates.
The Dow Jones Industrial Average lost about 900 points, or nearly 2.5%, Monday morning, while the S&P 500 fell 2.3% and the tech-heavy Nasdaq fell 2.5%.
On Friday, the Bureau of Labor Statistics released worse-than-expected jobs data, showing that the U.S. unemployment rate climbed to 4.3% and the economy created just 114,000 jobs.
This has raised concerns that the Federal Reserve should have already cut interest rates by this point and risk tipping the economy into a recession.
The central bank has spent the past few years holding those rates at levels last seen before the Great Recession, hoping to curb inflation.
But some economic and financial data show that the U.S. economy is weakening rapidly as a result.
In addition to the jobs report, traders reacted to a weaker outlook for e-commerce giant Amazon, as well as a growing belief that much of the recent rally in tech stocks, which pushed the Nasdaq to a record high just a month ago, has been overdone.
Among the companies that saw significant stock price declines early Monday:
Nvidia, which has been at the center of the tech stock rally thanks to its unique graphics chips, fell 6%. Apple fell 3% on Monday. Over the weekend, Warren Buffett’s Berkshire Hathaway Group disclosed that it had sold nearly half of its stake in the tech giant. Amazon, -4% , and Microsoft, -3% .
While macroeconomic forces weighed on markets, other commentators pointed out that much of the decline was also due to traders abandoning a popular strategy to counter higher interest rates from the Fed.
While the U.S. central bank was making borrowing more expensive in the United States, the Bank of Japan had until recently kept interest rates lower to boost yen investment. And it paid off: Wall Street began borrowing against the yen at lower interest rates to invest more cheaply in desired assets.
Today, the tables have turned: the BOJ signaled its intention to raise interest rates, while Fed Chairman Jerome Powell said a September rate was almost certainly in sight.
The result is that the US dollar has erased most of its gains for the year.
The Tokyo Stock Exchange on Monday. Noriko Hayashi/Bloomberg via Getty Images
At the same time, investors are increasingly putting their money into U.S. Treasury bonds, which are seen as “safe haven” assets that serve as stores of wealth in times of volatility.
The 10-year bond yield hit 3.68%, its lowest level since June 2023. While this is a signal that recession fears are rising, it could also provide some relief to the housing market, as mortgage rates track the 10-year yield.
Cryptocurrencies including bitcoin and ethereum also saw significant price declines. Bitcoin fell nearly 14% to around $50,000, its lowest level since the spring, while ethereum fell 17% to around $2,200, erasing its gains for the year.
David Hodari
Rob Wile
Arata Yamamoto contributed.
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Sources 2/ https://www.nbcnews.com/business/markets/us-recession-fears-international-selloff-markets-nikkei-rcna165119 The mention sources can contact us to remove/changing this article |
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