U.S. stocks tumbled on Monday, part of a global sell-off as investors braced for days of volatility as concerns grew about a slowing U.S. economy and overheating of gains in the technology sector.
The S&P 500 fell 3%, its biggest one-day drop since September 2022, and the Nasdaq 100, which tracks technology stocks, fell by a similar amount. Both benchmarks pared losses from earlier in the session after a stronger-than-expected report on the services sector eased worries about the economy.
At the same time, the VIX index of stock market volatility surged, reaching its highest level since early 2020. The economy plummeted.
“Too many people were overly long risk and short volatility, and now the game has stopped,” said Matthew Rowe, head of cross-asset strategy at Nomura Capital Management. “On many levels it still is. There’s a lot of uncertainty: monetary policy, geopolitics, election results, and stock valuations are at historically very high levels.
Large technology stocks were the first to bear the brunt, with the Bloomberg Magnificent 7 Index falling the most since 2015. Shares of companies such as Nvidia and Apple plummeted, with both companies cutting losses on the day.
Concerns about the health of the U.S. economy took center stage after data on Friday showed unemployment rose in July, triggering closely watched recession indicators.
Florian Ielpo, head of macro research at Lombard Odier Asset Management, said: “With low liquidity during the summer, the trend remains strong and the need to unwind positions, and the VIX index is extremely high, this selling trend is likely to continue for a few days. Nonetheless, “the macro picture It’s not as bad as the market thinks. “
News that Warren Buffett’s Berkshire Hathaway cut its stake in Apple by nearly 50% in the second quarter also contributed to risk aversion in the technology sector. Slow monetization of artificial intelligence tools, a long-standing concern among tech investors, persists as the first preview of Apple Intelligence failed to live up to the hype.
There are reports that Nvidia’s much-anticipated Blackwell chip will be delayed due to design flaws, and the artificial intelligence supply chain has been hit again. According to “Information”, the rollout of the chips could be delayed by three months or more, which could hit major technology companies from Meta to Microsoft.
“When market sentiment starts to sour, the declines could become more extreme than they should be,” said Ben Barringer, an analyst at Quilter Cheviot. Tech stocks are likely to be volatile in the coming weeks, he said.
The turmoil in Japanese markets – with the Bank of Japan starting to raise interest rates as the Federal Reserve seeks to cut them – is also sending ripples across asset classes in global markets. Investors are turning to the reverse carry trade, borrowing at lower interest rates in Japan to fund purchases of higher-yielding assets elsewhere. Japan’s Topix stock index is down 24% from a record high hit last month, and the yen has also risen sharply.
“With yen carry trades now rapidly unwinding, not only is the yen’s depreciation trend clearly broken against all major units, but the risk assets that finance these trades are also being sold off,” Asymmetry Advisors strategist Amir Anvarzadeh wrote in a note. ” Customer Notes.
Industries worthy of attention
- Shares of Apple suppliers plummeted after Berkshire Hathaway halved its stake in the iPhone maker. The decline came amid a broad market sell-off on Monday. Shares of Taipei-listed iPhone assembler Hon Hai Precision Industry Co. and chipmaker Taiwan Semiconductor Manufacturing Co. fell.
- The largest U.S. companies fell, with Nvidia and Apple leading losses among the seven largest companies in the broader rout.
- Bitcoin fell 13% last week and shares of cryptocurrency-related companies fell, the worst losses since the collapse of the FTX exchange.
- Packaged food stocks are in focus after reports that Mars is exploring an acquisition of Kellanova. TD Cowen analyst Robert Moskow wrote that a merger “could trigger another consolidation cycle in the packaged foods space, similar to 1999 to 2001, driving up valuations.”
Market overview
- S&P 500 down 3%
- The Dow Jones Industrial Average fell 2.6%
- The Nasdaq fell 3.4%
- The Nasdaq fell 3%
- Russell 2000 Index fell 3.3%
- 10-year Treasury yield fell 1.7 basis points
- Cboe Volatility Index rose 13.80 points
- The Bloomberg Dollar Index fell 0.3%
- West Texas Intermediate crude rose 0.3% to $74 a barrel
- The euro rose 0.4%
This is the most compelling promoter
- Nvidia shares fell 6% after reports that the company’s upcoming artificial intelligence chips will be delayed due to design flaws.
- Berkshire Hathaway’s shares fell 4.8% after reporting on Saturday that it had cut its stake in Apple by nearly 50% as part of a massive sell-off in the second quarter.
- Robinhood shares fell 8.2%, and Bitcoin lost about a fifth of its value in the global sell-off.
- Kellanova shares rose 16% after Reuters reported that Mars was considering acquiring the snack maker, citing people familiar with the matter.
- Tyson Foods shares rose 2.1% after the company reported third-quarter adjusted earnings per share that beat analysts’ average estimate.
Seller Notes
- Moderna shares fell 3.3% after RBC Capital Markets downgraded the company to industry perform from outperform, with analysts noting that the downgrade reflected “an increasingly uncertain outlook.”
- Lockheed Martin shares ended little changed after RBC Capital Markets issued an outperform recommendation for the defense contractor. The broker noted that the upgrade reflected “improved revenue prospects.”
- Barclays analyst Gena Wang downgraded Vertex Pharmaceuticals to equal weight from overweight, citing valuation. Shares fell 3.6%.
- Five9 fell 1.5% amid the broader sell-off, although Bank of America upgraded it to buy from underperform, erasing analysts’ only negative rating on the software company.
- Shares of the digital optical communications equipment maker fell 2% after Rosenblatt Securities downgraded the company’s rating to “neutral” from “buy.”
- Academy Sports & Outdoors shares fell after JPMorgan downgraded the stock to neutral from overweight.
- Mobileye Global shares fell 4.9% after Daiwa Securities downgraded the auto supplier to “neutral” from “buy.”
Related market news
- Takeaway: Just as the stock market began to celebrate the first signal from the Federal Reserve to cut interest rates, the stock market was hit by a perfect storm: unexpectedly weak economic data stoked recession concerns, sluggish corporate earnings, and poor seasonal trends.
- European stocks: European stocks tumbled, extending last week’s losses, as a global rout intensified and investors abandoned technology stocks that have driven gains this year.
- Within Asia: Most Asian currencies rose against the dollar, buoyed by rising dovish bets on the Federal Reserve and falling Treasury yields. The ringgit outperformed as foreign bond inflows improved.
This story was produced with the assistance of Bloomberg Automation.
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