Fears of further market turmoil deepen after US economic data spooked investors

Old_Joe

Analysts await key services sector metric to gauge US vulnerability to recession as stocks in Middle East fall amid regional tension

Following are edited excerpts from a current report in The Guardian:

Global investors are bracing for further turmoil, after fears that the powerhouse US economy could be drifting towards recession sent stock markets tumbling at the end of last week. Investors in Europe, Asia and New York were spooked by US data that include worse-than-expected job numbers on Thursday, prompting concern that the world’s largest economy is in worse shape than previously thought.

The data, coupled with disappointing results from tech firms Amazon, Alphabet and Intel, led to share sell-offs at the end of last week, while Middle Eastern stocks also fell on Sunday amid persistent tension in the region. Analysts fear that any further signs of fragility in large economies could herald fresh volatility. A slowdown in Germany last month prompted analysts to warn of a recession, while a rise in interest rates by Japan’s central bank sent shares on the Nikkei index down 2,216 points, or nearly 6%, on Friday.

In the last month, the prospect of a recession in some of the world’s biggest economies has sent the cost of a barrel of Brent crude falling from almost $88 to below $78.

Closely watched economic data due this week in the US includes figures for the services sector on Monday and the unemployment claimant count on Thursday. Elsewhere, the UK is among several big economies, including China and Japan, to release service sector data on Monday.

Markets got the jitters last week after US jobs data for July showed a worse-than-expected slowdown, with 114,000 jobs created rather than the predicted 175,000. The unemployment rate increased to a three-year high of 4.3%, while US manufacturing activity also slumped, falling to an eight-month low in July as new orders tailed off.

The figures stoked anxiety that the world’s largest economy is vulnerable to a recession and may need to cut rates faster than expected to spur demand, rather than unwinding them in a more orderly fashion. So far this year, investors have grown accustomed to cooling inflation and gradually slowing employment, which appeared to be setting the scene for the Fed to begin trimming interest rates gradually.

That optimism had driven big gains in stocks: the S&P 500 is up by 12% this year, despite recent losses, while the tech-focused Nasdaq has gained nearly 12%.

But on Friday, the Nasdaq lost 2.4% to finish in correction territory – 10% off its record high, while Japanese equities recorded their worst day since the Covid-19 pandemic, with the Nikkei 225 index down 5.8%. In London, the FTSE100 blue-chip share index lost more than 120 points at one stage, down by 1.5%. Europe’s main stock indices also declined on Friday, with European technology stocks falling to their lowest level in more than six months. France’s CAC 40 hit its lowest level since last November, down more than 1%, while Germany’s DAX lost 2%.

In the US, Uber, Airbnb, Hilton International and Coca-Cola are among the big firms posting financial results this week. European bellwether stocks such as the Italian insurer Generali and Deutsche Telekom, will also report this week.

While shares slid, gold hit a new record on Friday as investors flocked to safe-haven assets. The US dollar weakened, lifting the pound by 0.5% to $1.28, and the euro by 1.2% to $1.092.

Crash

Mr. Market always overreacts, both to good news and bad. I've seen this movie, over and over. Still, the upcoming anticipated rate cuts does set the table for a new regime. Keep a close eye on those corporate earnings, and employment numbers. "The USA catches a cold, and Canada will come down with the flu." Same elsewhere, too.
https://www.bloomberg.com/news/articles/2024-08-02/bank-of-canada-seen-cutting-rates-faster-after-weak-us-jobs-data?srnd=phx-fixed-income

JD_co

Per A Wealth of Common Sense....with my bold for emphasis:

https://awealthofcommonsense.com/2024/08/this-is-normal-2/

"The S&P 500 has finished the year up double-digits in 56 out of 96 years since 1928 (almost 60% of the time). In 24 of those 56 years with double-digit gains, there was a double-digit loss at some point in the same year. That means nearly 45% of the time when the stock market has been up 10% or more, there has been a correction of 10% or worse on the path to those gains."

Old_Joe

Jawohl, Comrade! Kinda 50/50 chance, yes?

Observant1

Futures for the Dow, S&P 500, and Nasdaq 100 were down 3.1%, 4.3%, and 6.2% respectively at 5:00 AM.

"The Nasdaq is leading markets lower in premarket trading as futures drop early Monday,
led by technology stocks, after a big retreat on Friday.
Shares are slumping worldwide as traders are worrying that the U.S. economy
could suffer a sharp slowdown after worse-than-expected jobs data last week.
The fear is that any interest-rate cuts from the Federal Reserve may come too late to bolster growth.
Japan’s Nikkei index suffered its worst one-day drop since 1987 on Monday."

https://www.barrons.com/livecoverage/stock-market-today-080524

catch22

Thanks, @Old_Joe
And yes, @Observant1 ; nasty futures and foreign markets.

rforno

Buckle up, folks ...

There are only 3 positions to be in the stock markets on days like this: long, short, or fetal.

hank

OJ’s made some pretty good calls of late.

Old_Joe

Per WSJ- hardly a "crash", but certainly a tech correction:

S&P 500 -2.02%
DJIA -1.92%

Technology -4.63%

and! ... DJT -8.56%

Observant1

With apologies to the Brits, Keep Calm and Carry On.

BaluBalu

We have too many threads about market conditions. I recognize the one titled "Rotation City . . ." is meant for data sharing and substantive discussions. It would be great if we can limit to one other thread - one thread at a time.