Stocks tumble as Dow, S&P 500 close out worst day since 2022
Stocks plunged on Monday as U.S. recession fears caused turmoil throughout the global markets.
The Dow Jones Industrial Average tumbled 1,033.99 points, or 2.6%, while the Nasdaq Composite and S&P 500 fell 3.43% and 3%, respectively. The Dow and S&P 500 closed out their worst day since September 2022.
A weak jobs report and shrinking manufacturing activity in the world's largest economy, coupled with dismal forecasts from the big technology firms, pushed the Nasdaq 100 and Nasdaq Composite into a correction last week.
"While Friday’s employment report was disappointing, it wasn’t the only worrisome economic indicator, only the latest," said Greg McBride, Bankrate's chief financial analyst. "Couple economic concerns with the cacophony of earnings disappointments and weak corporate outlooks, global unrest, and currency gyrations, and you have the recipe for sudden volatility."
THE JULY JOBS REPORT JUST TRIGGERED A RELIABLE RECESSION INDICATOR
The weak jobs data also triggered what is known as the "Sahm Rule," seen by many as a historically accurate recession indicator.
"The July jobs report is being viewed as a recession warning, and the markets are responding accordingly," said Bill Adams, chief economist at the Dallas-based Comerica Bank.
Traders work on the floor of the New York Stock Exchange during afternoon trading on August 05, 2024 in New York City. All three major indexes closed with significant losses. (Photo by Michael M. Santiago/Getty Images)
With the jobless rate unexpectedly rising, the so-called Sahm rule is now in play. Named after former Federal Reserve economist Claudia Sahm, the rule has successfully predicted every recession since 1970.
It stipulates that the economy is in the early stages of a recession when the three-month moving average of the jobless rate is at least a half-percentage point higher than the 12-month low. Over the past three months, the unemployment rate has averaged 4.13%, which is 0.63 percentage points higher than the 3.5% rate recorded in July 2023, crossing that threshold.
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Big Wall Street brokerages also revised their Fed rate projections for 2024 to show greater policy easing by the central bank.
Japanese stocks also fell on Monday, with the Nikkei 225 index closing lower by more than 12% – 4,451.28 points – in its worst day since 1987.
Cryptocurrencies plunged as well, with the price of bitcoin falling 17.5% to $50,239 a coin on Monday morning. The price of ethereum slid 23% to $2,230 apiece.
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FOX Business' Megan Henney and Reuters contributed to this report.