On Monday, US benchmark equity indexes experienced a significant downturn following a sharp sell-off in the previous session, fueled by rising concerns over a potential economic downturn. The Nasdaq Composite saw a troubling drop of 3.4%, landing at 16,200.1, marking its entry into correction territory just days after a previous struggle.
The S&P 500 followed suit with a 3% decrease, settling at 5,186.3, while the Dow Jones Industrial Average faced a decline of 2.6%, closing at 38,703.3. Losses were widespread across all sectors, with technology leading the plunge at 3.8%, highlighting the sector’s vulnerability amid economic uncertainties. Recent data from the US Bureau of Labor Statistics indicated a weaker-than-expected jobs report for July, contributing to a jump in the unemployment rate from June's 4.1% to 4.3%.
This alarming report catalyzed a broad market sell-off, intensifying worries about a possible recession, which many analysts believe might be overblown. Their optimism comes in the wake of credible data that suggests the labor market is not as weak as it might appear, coupled with steady income growth that continues to underpin consumer spending. D.A.
Davidson remarked in a note to clients that global stock markets saw a sharp drop, with Japanese shares suffering to the extent that they at one point exceeded the losses witnessed during the 1987 'Black Monday'. The prevailing concerns surrounding a potential downturn in the US economy have led to a flight from riskier assets, leaving many investors reassessing their strategies.
Meanwhile, on a more positive note, the US 10-year yield experienced a small drop of 1.4 basis points, settling at 3.78%, while the two-year rate slightly increased by three basis points to reach 3.9%. In more detailed economic news, two recent surveys provided contrasting signals regarding the US services sector for July.
The Institute for Supply Management reported an unexpected expansion in activity, although S&P Global ($SPGI) indicated a minor deceleration in growth. Additionally, the ISM reported that the US manufacturing sector continued to deepen into contraction last month, correlating with S&P Global's findings that pointed towards a decline in activity. In the commodities market, West Texas Intermediate crude oil saw a slight increase of 0.4%, now priced at $73.8 a barrel as concerns about economic stability keep traders on edge. Looking into corporate performances, major players such as Walt Disney ($DIS), Eli Lilly ($LLY), Amgen ($AMGN), Caterpillar ($CAT), Uber ($UBER), CVS Health ($CVS), Paramount Global ($PARA, $PARAA), and Hilton Worldwide ($HLT.US) are set to unveil their quarterly financial results later this week. On the company front, shares of Intel ($INTC) took a hit, plunging by 6.4%, marking the steepest decline on both the Dow and Nasdaq indices, and among the worst performers on the S&P 500.
This decline followed an alarming 26% plunge on Friday after Intel reported second-quarter financial results that failed to meet Wall Street expectations. The chipmaker also unveiled a $10 billion cost-cutting strategy, including a suspension of dividends starting in the fourth quarter, further alarming investors. Nvidia ($NVDA) faced considerable pressure as well, with shares falling 6.4%, ranking it among the S&P 500's worst performers.
Reports indicated delays in the company’s new artificial intelligence chips due to design difficulties, which could impact key customers including Microsoft ($MSFT), Meta Platforms ($META), and Alphabet’s ($GOOGL, $GOOGL) Google, according to unnamed sources cited by The Information. On a different note, Mars, the corporation behind renowned candies like M&M's and Snickers, is purportedly contemplating the acquisition of snacks manufacturer Kellanova ($K), with multiple news reports highlighting this potential move.
Following the announcement, Kellanova shares surged by 16%, becoming the top gainer on the S&P 500 for the day. Following Kellanova, the next notable performer was Tyson Foods ($TSN), which experienced a positive rise of 2.1% after reporting fiscal third-quarter results that surpassed expectations year over year, driven by increased prices and volume gains in beef and pork.
The company reiterated its full-year sales outlook, signaling robust operational performance. In the precious metals market, gold saw a dip of 0.9%, settling at $2,447.60 per troy ounce, while silver posted a notable loss of 3.8% to $27.31 per ounce, reflecting the broader trends in risk sentiment among investors..