New York stock exchange plunges amid recession fears

The New York Stock Exchange began the week with a steep drop as recession fears intensified in the U.S. and developments in Asian markets deepened the global sell-off. The Dow Jones and Nasdaq indices fell by more than 1,000 points each, while the S&P 500's Volatility Index, known as the "fear index," surged to 65.70, its highest level in four years.

Market Decline Overview

At the opening bell, the Dow Jones index dropped over 1,000 points, declining by 2.68% to 38,670.55 points. The S&P 500 fell by 4.07% to 5,128.93 points, and the Nasdaq index decreased by more than 1,000 points, losing 6.25% to 15,728.46 points.

Recession Concerns

Negative trends have been observed in U.S. markets since last week due to fears of a sharper-than-expected economic slowdown. Despite the Federal Reserve (Fed) keeping the policy rate unchanged in its last meeting and signaling a rate cut in September, recent data has continued to fuel recession concerns, significantly raising risk perceptions.

Economic Indicators

Recent data showed non-farm employment in the U.S. increased by 114,000 in July, falling short of expectations. The unemployment rate rose from 4.1% to 4.3% during the same period, reaching its highest level since October 2021. The Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers’ Index (PMI) also fell to 46.8 in July, marking an eight-month low and missing market expectations.

Market Reactions and Fed Expectations

Following these data releases, the likelihood of the Fed cutting the policy rate by 50 basis points in September surged to over 90% in money markets. Analysts expressed concerns about the Fed being slow to start rate cuts. The sharp declines in global markets have brought up the possibility of an emergency rate cut by the Fed, which analysts warn could further exacerbate market panic.

Statements from Fed Officials

Chicago Fed President Austan Goolsbee indicated that the Fed would respond to signs of economic weakness, avoiding comments on the possibility of an emergency meeting for a rate cut. "If the economy is weakening, maintaining a restrictive policy stance doesn’t make sense," Goolsbee said, noting that employment figures were weaker than expected but the economy was not yet in a recession.

Safe-Haven Assets and Bond Yields

As recession fears grew, demand for safe-haven assets strengthened. The yield on the U.S. 10-year Treasury note dropped to 3.667%, its lowest level since June 2023. The yield on the 2-year Treasury note fell to 3.660%, below the 10-year yield for the first time since July 2022. The dollar index decreased by 0.88% to 102.08, while the euro/dollar exchange rate climbed by 0.80% to 1.099. The dollar/yen rate fell by 2.63% to 142.68.

Impact on Tech Stocks

On the first trading day of the week, technology stocks were notably affected. Nvidia shares, which had been prominent in the artificial intelligence rally, dropped by over 10%. Apple shares fell more than 5% following the news that Berkshire Hathaway, led by billionaire investor Warren Buffett, had halved its stake in the company. Other major tech companies also saw declines, with Microsoft down by over 3%, Meta by over 4%, Alphabet by over 3%, and Amazon by over 5%.

Asian Markets

Developments in Asian markets were also closely watched. Japan's Nikkei 225 index recorded its largest drop since 1987, falling by 12.40% amid a more hawkish stance from the Bank of Japan (BoJ) and rising global recession fears.