What a way to end the week. The market plunged again Friday, with the Dow closing down 600 points, the Nasdaq dropping 2.4%, and the S&P off 6% from its recent all-time high.
Market watchers identified three main reasons for the downturn:
- Weak Jobs Report: The weak jobs report reignited recession fears on Wall Street. The unemployment rate rose to 4.3%, spooking investors. The new Labor Department data triggered the Sahm Rule, which indicates the likely start of a recession once the unemployment rate’s three-month moving average exceeds its lowest point over the past 12 months. “We completely flipped from a position where a weaker economy was bullish to one where a weaker economy is bearish,” said Jay Hatfield, CEO of Infrastructure Capital Advisors.
- Short-Term Traders: According to Hatfield, short-term investors like hedge funds drove a global sell-off over the past two days. They are hesitant to stay long on stocks now that earnings season is over. Despite this, Hatfield said, “We think the chance of recession remains extraordinarily low, and the sell-off is irrational.”
- Rate Cut Expectations: Investors wanted a rate cut and criticized the Federal Reserve for not cutting rates on Wednesday. Hatfield compared Fed Chair Jerome Powell, who suggested a rate cut might be “on the table” for September, to Inspector Clouseau, the fictional detective from The Pink Panther films. “One of their three mandates is to be behind the curve,” Hatfield said of Powell’s Fed. “So until it’s entirely obvious to everyone else in the investing world that they should cut, they’re not going to cut.”
One factor experts say likely wasn’t at play? Steep losses from mega-cap names. Intel shares plunged 26% after reporting a big earnings miss and announcing mass layoffs, and Amazon’s stock fell 9% after a disappointing earnings call. However, Apple, America’s largest company, ended Friday’s session slightly up.
In India, Sensex fell over 800 points on Friday amid a broad sell-off triggered by a crash in global markets. Sensex dropped 850 points to 81,020, and Nifty slipped 268.95 points to 24,741, reflecting weak investor sentiment on Dalal Street. Investor wealth declined by Rs 5.42 lakh crore to Rs 456.20 lakh crore, down from Rs 461.62 lakh crore in the previous session.
A larger-than-expected rise in US jobless claims last week sent indices into a tailspin. New data indicated jobless claims stood at 249,000 last week, above estimates of 236,000. Additionally, the ISM manufacturing index fell to 46.8% in July from 48.5% in June, marking an eight-month low and indicating that US factories were still in a downturn.
The NASDAQ Composite Index slipped 405 points, or 2.30%, to 17,194. The S&P 500 closed 1.37%, or 75 points, lower at 5,446.68. The Dow Jones Industrial Average plunged 1.2%, or 495 points, to 40,348.
Overnight sell-offs in US markets led to weakness in Asian markets today. Japan’s Nikkei crashed 1,800 points to 36,325, Hang Seng slipped 356 points to 16,943, and Taiwan’s Weighted Index tumbled 831 points to 21,810.
Here’s a look at today’s market crash in numbers:
Top Losers: Tata Motors, Maruti, Tata Steel, JSW Steel, L&T, and Adani Ports led losses on Sensex, falling up to 3.34% in early deals.
52-Week Highs and Lows: 121 stocks hit their 52-week highs today, while 17 shares hit their 52-week lows on the BSE in early deals.
Market Breadth: Out of 3,208 stocks traded, 1,016 were in the green. Around 2,088 stocks were in the red, while 104 remained unchanged.
Lower and Upper Circuits: About 60 stocks hit their lower circuits as the stock market tanked in the early morning session. On the other hand, 101 shares hit their upper circuit limits, defying the negative sentiment on the BSE.