Global Markets Plunge as Tech Stocks Lead the Way Down
At market close, the Dow Jones Industrial Average was down 2.6 percent to 38,704, while the tech-heavy Nasdaq Composite fell 3.4 percent to 16,200. The broad S&P 500 index lost 3.0 percent to 5,186, equivalent to a 0.6 percent decline from the Stockholm Stock Exchange closing.
The volatility index VIX, sometimes referred to as the market’s fear index, reached levels not seen since the COVID-19 induced market crashes in the spring of 2020.
In Japan, Monday marked the worst single-day performance since “Black Monday” in 1987. The Nikkei 225 index dropped 12 percent. For the American S&P 500, Monday’s decline was the heaviest since September 2022.
The pessimistic sentiment was mainly fueled by the weaker US jobs report on Friday, raising concerns about a global economic slowdown. The discussion around the Fed has now shifted to whether the interest rate should be cut by 25 or 50 basis points at the September meeting, with some analysts even suggesting an interim rate cut.
In stock trading, the technology sector was particularly weighed down by economic concerns – from strong gains earlier in the year, and now the Nasdaq composite index is approaching correction territory. Nvidia stock traded down 6.2 percent, while Intel, which plummeted 26 percent on Friday, fell by a similar magnitude. AMD strengthened by 1.8 percent against the trend. In Nvidia’s case, there have been reports that the company’s upcoming AI chip will be delayed due to design flaws.
Furthermore, Apple fell by 4.9 percent. In addition to the general sentiment, Warren Buffett’s investment conglomerate Berkshire Hathaway has sold nearly half of its stake in the tech giant.
Alphabet weakened by 4.5 percent, following a decline that intensified after Google’s subsidiary lost to the US Department of Justice in a case where the company was accused of monopoly. According to a judge, the company illegally paid to make its search engine the default on smartphone browsers.
Other tech names like Amazon, Meta Platforms, and Tesla declined by 4.1, 2.5, and 4.2 percent, respectively.
In the bond market, the ten-year yield slightly stabilized from Friday, and was down 1 basis point to 3.78 percent.
Analysis:
The global financial markets experienced a significant downturn, with tech stocks leading the decline. Concerns about a global economic slowdown, fueled by a weaker US jobs report, have sparked pessimism among investors. The Federal Reserve’s upcoming interest rate decision is now under scrutiny, with the possibility of a rate cut being discussed. Tech giants like Nvidia, Apple, and Alphabet faced substantial losses, while Warren Buffett’s Berkshire Hathaway made significant moves in its tech holdings. Overall, the market volatility and economic uncertainties highlight the importance of closely monitoring developments and adjusting investment strategies accordingly.