- Wall Street sees big selloff
- Nasdaq down 3.2%
- Magnificent Seven plummet
2:10pm: Volatility ahead
"Are the markets pricing in a recession or simply a recalibration?" asks John Lynch, chief investment officer at Comerica.
"When investors turned their calendars to August, they may have flipped the narrative on the economy at the same time. It's been less than two weeks since the second quarter GDP report surprised to the upside, with equity markets hovering near record levels, yet there is growing sentiment that the Fed has waited too long to cut interest rates and is now behind the curve.
While we're not completely sold on the new narrative, the one thing that seems certain is that there is more volatility ahead."
11am: Just eight S&P 500 stocks in the green
Market mayhem has swept across just about every constituent of the S&P 500, with just eight companies in the green and only five adding more than 1%.
Pringles owner Kellanova (NYSE:K) has sufficiently bucked the trend, rallying 13% on reports that Mars is mulling a takeover bid.
Two chipmakers, ON Semiconductor Corp and Advanced Micro Devices Inc (NASDAQ:AMD, ETR:AMD) are also in the green, as is consumer goods group Church & Dwight, real estate firm Welltower and CrowdStrike.
In a research note, Wedbush analysts suggested that CrowdStrike’s liabilities following the disastrous IT outage in July will be “a lot less than feared”.
No constituents of the Dow Jones Industrial Average were bid higher.
10.50am: Calls for emergency interest rate cut escalate
Jeremy Siegel, professor emeritus of finance at University of Pennsylvania’s Wharton School, floated the idea of an emergency rate cut in a CNBC interview today.
It comes amid a bloody day for the stock market, with the Nasdaq slammed by 600 points and the S&P 500 shedding over 3%.
Siegel called on the Federal Reserve to immediately cut rates by 75 basis points, plus another 75 points at the next Monetary Policy Committee meeting in September.
If the Fed heeds his advice, it would bring the base rate down from 5.5% to 4% in the space of a month.
This could stimulate borrowing and inject liquidity in the the stock market, but it would also raise the risk of inflation ticking higher.
The Fed, which has kept the base rate at 5.5% since July 2023 in order to get a grip on runaway inflation, is unlikely to enact a knee-jerk policy that could risk reversing the progress made.
But Siegel is not alone in wishing upon a swift rate cut.
Bond markets have raised the odds of a potential US interest rate cut, with traders pricing in around a 60% chance of an emergency quarter-point cut by the Fed within the coming week.
Bank of America today stated: “The bottom line is that the weaker-than-expected July employment report led us to change our baseline expectation for the first Fed cut from December to September."
10.15am: Coinbase crushed
Coinbase Global Inc (NASDAQ:COIN) was off 9% on Monday in response to a broader sell-off of technology stocks and collapsing bitcoin spot price.
The Nasdaq-listed cryptocurrency exchange, which primarily generates revenues from bitcoin trades, posted strong second-quarter financials on Friday.
But broader anxieties around a US recession, coupled with a multi-trillion-dollar sell-off of US tech stocks, has kept the stock from remaining well bid amid general market turmoil.
Bitcoin has been particularly hard hit by the global risk-off pivot, having plummeted to a six-month low against the US dollar on Monday.
The BTC/USD pair fell as low as $49,000 – 16% belo Sunday’s closing price – before buying pressure pushed the pair back above $51,000.
9.40am: US stocks plummet
US stocks have opened sustainably lower today, beginning what may be the worst session for Wall Street in recent years as the current global sell-off continues.
The Nasdaq saw 5.5% of its value lost on Monday, with the tech-heavy index appearing to have suffered the worst from the dip in the megacaps.
The Dow Jones dropped around 3% to 38,522, while the S&P 500 dropped 3.7% to 5,146.
Kellonova, the owner of Pringles and other snack brands, was one of the only risers today, lifting close to 17% after it was reported rival Mars was interested in purchasing it.
The group prior to today had a value of about US $27 billion including debt, having risen by around 20% since it was spun out of Kellogg's last year.
Neither party confirmed the deal with the report suggesting other parties might be interested.
8.50am: Mag Seven sheds US$2.3 trillion since July
As the Nasdaq readies to shed close to 1,000 points at the open, analysts at AJ Bell have noted that trillions of the Magnificent Seven's value has been lost since peaking.
Some US$2.3 trillion of the seven megacaps' market capitalisation has been removed since it peaked in July, but the companies values still represent a third of the S&P 500's value and a fifth of the global stock market.
"There are two ways of looking at the summer stock market stumble. Bulls will see it as a hiatus and no more during the traditionally stale period where major players sell in May and go away, returning on St. Leger Day in September, while bears will argue this is the start of a long overdue reckoning for markets where buybacks, borrowing on margin (or in yen) and central bank largesse are providing liquidity to overvalued, overhyped risk-on assets,” said AJ Bell investment director Russ Mould.
"The fight is on. Bulls will note without undue concern that the aggregate stock market valuation of the Magnificent Seven is only back to where it was in June and the NASDAQ is at levels seen as recently as late May.
"Bears will say that someone, somewhere has lost $2.3 trillion on the Mag7 since May, while the NASDAQ is just 5% above where it was in November 2021, before the AI hype machine moved into top gear."
8.34am: Wall Street set for chaotic session
Escalating recession fears and a tepid tech earnings season are set to cause havoc on the US stock market today.
Pre-market data points to losses across the board, continuing on from a poor trading session on Friday when markets reacted to a concerning July jobs report.
According to Bureau of Labor Statistics non-farm payroll data, 114,000 jobs were added to the US economy in July - well below expectations for 175,000.
Unemployment climbed to 4.3% over the month, the data showed, hitting its highest level since October 2021.
Some of the biggest losses will be felt in the technology sector, with the Nasdaq 100 expected to shed 1,025 points when trading commences.
Apple Inc (NASDAQ:AAPL, ETR:APC), which managed to stave off the worst of last Friday’s repricing, is expected to fall around 9%, while Nvidia Corp is tipped to fall over 14%.
All other Magnificent Seven tech stocks are expected to shed low to mid-single digits.
Tech stocks are facing mounting pressure following on from the latest round of earnings from the likes of Apple, Microsoft Corp (NASDAQ:MSFT) and Amazon.com Inc (NASDAQ:AMZN).
Although company revenues largely fell in line with expectations, they failed to show significant growth in the artificial intelligence segment.
Microsoft's AI-powered Azure Cloud computing platform, for example, fell slightly shy of estimates, leading to a punishing response from investors.
There are mounting fears of another tech bubble as AI-led earnings growth falls short of The Street’s lofty short-term expectations.
The Dow Jones Industrial Average is expected to open around 600 points lower today, representing 1.5% in value wiped from the index.
The broader S&P 500, meanwhile, is tipped to bleed 114 points, or 2.15%.