In a striking turn of events, US benchmark equity indexes experienced significant declines on Monday, following a rampant sell-off from the previous session. The persistent fears surrounding a potential economic downturn weighed heavily on market participants, amplifying concerns across all sectors. The Nasdaq Composite plunged by a staggering 3.4%, landing at 16,200.1, marking its entry into correction territory just days earlier.
The downturn was not isolated, as the S&P 500 followed suit, slumping 3% to settle at 5,186.3, and the Dow Jones Industrial Average recorded a 2.6% drop, reaching 38,703.3. The technology sector bore the brunt of the losses, exhibiting a sharp 3.8% decline, indicative of widespread vulnerability in the market. Recent economic indicators have contributed to the unease.
The Bureau of Labor Statistics released a jobs report on Friday that fell short of expectations for July, revealing an uptick in the unemployment rate to 4.3%, up from June’s 4.1%. This disappointing data spurred a broad stock market selloff, heightening worries about a looming recession. Commenting on the global ramifications, D.A.
Davidson noted that global stock markets plummeted dramatically, with Japanese shares at one point surpassing their historical 'Black Monday' decline from 1987. The prevailing narrative remained that concerns about a US recession were prompting investors to tread cautiously. Despite these fears, several analysts argued that recession concerns may be exaggerated.
They suggested that recent labor market data is not as dire as it appears, contending that income growth continues to bolster consumer spending, thereby providing a buffer against recessionary pressures. Interest rates reflected this mixed sentiment. The yield on the US 10-year Treasury fell by 1.5 basis points to 3.78% on Monday, while the two-year rate saw a rise of 2.3 basis points, landing at 3.89%.
Such fluctuations in bond yields frequently mirror investor sentiment and expectations regarding future economic conditions. In economic news, two contrasting surveys illustrated the state of the US services sector for July. The Institute for Supply Management reported that activity in the sector expanded beyond expectations, while S&P Global indicated a slight deceleration in growth, hinting at a complex economic landscape. Further compounding the situation, the ISM's recent reports indicated that the US manufacturing sector had entered a deeper contraction phase on a monthly basis, with S&P Global data revealing negative growth trends. On the commodities front, West Texas Intermediate crude oil prices edged up by 0.3%, priced at $73.77 a barrel on Monday, reflecting ongoing volatility in energy markets. Corporate earnings season is upon us, with notable companies such as Walt Disney, Eli Lilly, Amgen, Caterpillar, Uber, CVS Health, Paramount Global, and Hilton Worldwide slated to disclose their latest quarterly results later this week.
These earnings reports will be pivotal in providing insight into corporate health and broader economic conditions. In company-specific news, shares of Intel took a significant hit, sliding 6.4%, marking the steepest decline on both the Dow and Nasdaq as well as among the S&P 500's worst performers.
This drop followed a 26% slump from Friday, triggered by the company’s Q2 financial results that disappointed market expectations. Additionally, Intel announced a stringent $10 billion cost-cutting plan and revealed plans to suspend its dividend starting in Q4, escalating investor concerns. Nvidia's stock also faced considerable pressure, down 6.4% amid worries that delays affect the rollout of new artificial intelligence chips due to design issues, which could impact major clients such as Microsoft, Meta Platforms, and Alphabet's Google. In a noteworthy development, Mars—the producer of beloved snacks like M&M's and Snickers—has been reported to be contemplating the acquisition of snacks manufacturer Kellanova.
Following the news, Kellanova shares surged by 16%, securing the position of the top gainer on the S&P 500. Furthermore, Tyson Foods saw a 2.1% rise in stock price after reporting fiscal Q3 results that exceeded expectations year-over-year, driven by growth in both price and volume in beef and pork sales.
The company reiterated its full-year sales outlook, providing a glimmer of optimism in a turbulent market. In the commodities realm, precious metals faced downward pressure, with gold prices dipping 0.8% to $2,449.50 per troy ounce, while silver experienced a 3.8% decline, settling at $27.31 per ounce, reflecting investor sentiment shifting amid economic uncertainty..