Robinhood and Nvidia lead market slump amid economic unrest

The S&P 500 Index fell 3%, the largest one-day loss since September 2022, and the technology-focused Nasdaq 100 Index slipped an identical amount. Both benchmarks pared losses from earlier within the session after a stronger-than-forecast services report eased concerns in regards to the economy.

Meanwhile, the VIX index for stock market volatility jumped, at one point reaching its highest level since early 2020. The day’s turmoil is a continuation of last week’s losses after a weak U.S. jobs report fueled concerns that the Federal Reserve will not be acting quickly enough to forestall a pointy economic downturn.

“There are so many people who have been betting on risk and too little volatility for too long, and now the game is over,” said Matthew Rowe, head of cross-asset strategies at Nomura Capital Management. “There is still a lot of uncertainty on many levels: monetary policy, geopolitics, the outcome of an election. And equities are coming from a point of valuations that were historically very high.”

Megacap technology firms bore the brunt of the losses, with the Bloomberg Magnificent 7 Index at one point recording its biggest drop since 2015 amid a slide by names reminiscent of Nvidia Corp. and Apple Inc., each of which pared losses on the day.

Concerns in regards to the health of the U.S. economy got here into focus after data on Friday showed unemployment rose in July, triggering a much-anticipated recession. indicator.

“Given the low liquidity during the summer, the still strong trend moves that need to be unwound and the high VIX value, this wave of selling could continue for a few more days,” said Florian Ielpo, head of macro research at Lombard Odier Asset Management. Nevertheless, “the macro picture itself is not as bad as the market seems to believe.”

The news that Warren Buffett’s Berkshire Hathaway slashed Also, its nearly 50% rise in Apple shares within the second quarter fueled risk aversion within the tech sector. Slow monetization of AI tools – a long-standing concern amongst tech investors – continues as the primary preview of Apple Intelligence didn’t live as much as expectations.

The AI ​​supply chain suffered one other blow amid Reports that Nvidia’s highly anticipated Blackwell chips can be delayed as a consequence of design flaws. The chips may very well be delayed by three months or more, potentially affecting major technology firms from Meta to Microsoft, the Information reported.

“If sentiment starts to deteriorate, the price declines may be more severe than they should be,” said Ben Barringer, an analyst at Quilter Cheviot. The next few weeks are prone to be volatile for technology stocks, he said.

Turbulence within the markets in Japan – where the central bank has began to lift rates of interest while the Fed plans to chop them – can be affecting global markets across various asset classes. Investors are likely to Carry tradesby which they borrowed money in Japan at lower rates of interest to finance the acquisition of higher-yielding assets elsewhere. Japan’s Topix stock index has fallen 24% from its record high last month and the yen has soared.

“With yen carry trades now being rapidly unwound, not only has the Japanese currency clearly broken its depreciating trend against all major currencies, but risky assets that were used to fund these trades are also being sold,” wrote Amir Anvarzadeh, strategist at Asymmetric Advisors, in a note to clients.

Sectors to observe

• Shares of Apple’s suppliers slumped after Berkshire Hathaway cut its stake within the iPhone maker by almost half. The decline got here amid a general sell-off on Monday. Taipei-listed iPhone maker Hon Hai Precision Industry Co. and chipmaker Taiwan Semiconductor Manufacturing Co. slipped.
• The largest US firms experienced a crash, with Nvidia and Apple leading the ranks of the “Magnificent Seven” amid a general decline.
• Shares of firms linked to cryptocurrencies fell as Bitcoin saw one other 13% drop last week, the worst drop for the reason that FTX exchange collapsed.
• Prepared food stocks have been in focus since news broke that Mars is considering a takeover of Kellanova. TD Cowen analyst Robert Moskow writes that a merger of the 2 “could usher in another cycle of consolidation in the prepared food space, similar to that seen in 1999-2001, and thus boost valuations.”

Markets at a look

• S&P 500 Index fell 3%
• The Dow Jones Industrial Average fell 2.6 percent
• Nasdaq Composite Index fell 3.4%
• Nasdaq 100 Index fell 3%
• The Russell 2000 Index fell 3.3 percent
• Yield on 10-year US Treasury bonds fell 1.7 basis points
• The Cboe volatility index rose 13.80 points
• Bloomberg Dollar Index fell 0.3 percent
• West Texas Intermediate crude oil rose 0.3 percent to $74 a barrel
• Euro rose by 0.4%

Here are essentially the most notable moving firms

• Nvidia shares fall 6% after it was announced that there could be delays in the discharge of the corporate’s upcoming AI chips as a consequence of design flaws.
• Apple fell 4.8 percent after Berkshire Hathaway said Saturday it had reduced its stake in the corporate by nearly 50 percent amid an enormous sell-off within the second quarter.
• Robinhood slips 8.2% as Bitcoin loses a few fifth of its value amid a worldwide sell-off.
• Kellanova rose 16% after Reuters reported, citing people aware of the matter, that Mars was exploring a takeover of the snack maker.
• Tyson shares rose 2.1% after the corporate reported third-quarter adjusted earnings per share that beat the common analyst estimate.

Notes from the sales page

• Moderna shares fell 3.3% after being downgraded to Sector Perform from Outperform at RBC Capital Markets, with the analyst noting that the downgrade reflected an “increasingly uncertain outlook.”
• Lockheed Martin shares closed little modified after RBC Capital Markets raised its rating on the defense contractor to outperform the industry, noting that the upgrade reflected “improved revenue guidance.”
• Barclays downgraded Vertex Pharmaceuticals from Overweight to Equivalent Weight. Analyst Gena Wang referred to the valuation. The shares fell by 3.6%.
• Five9 lost 1.5% amid a broader sell-off, despite BofA double-upgrading the stock from “underperform” to “buy,” removing the software company’s only negative analyst rating.
• Infinera shares fell 2% after Rosenblatt Securities downgraded the digital optical telecommunications equipment maker’s rating to “neutral” from “buy.”
• Academy Sports & Outdoors slips after the retailer was downgraded to neutral from obese at JPMorgan.
• Mobileye Global falls 4.9% after Daiwa Securities downgraded the auto parts supplier to neutral from buy.

Related Market News

• Taking stock: Just as stock markets began to have fun the Federal Reserve’s signals for a primary rate cut, they were hit by an ideal storm: surprisingly weak economic data that brought back recession fears, disappointing corporate earnings and poor seasonal trends.
• European stocks: European equities plunged, extending last week’s decline amid a deepening global equity slide and a shift away from the technology stocks that had powered this yr’s rally.
• Within Asia: Most Asian currencies gained against the dollar, boosted by rising dovish bets on the Federal Reserve and falling US Treasury yields. The ringgit fared higher on increasing momentum in foreign bond inflows.

This story was created with the help of Bloomberg Automation.

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