Dow Jones Index plunges 1,000 points, Nasdaq drops 6%, global markets in turmoil: Will tomorrow bring better weather?

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US Stock Market Plunges

On Monday, the US stock market experienced a significant drop, part of a global market sell-off driven by concerns of a US economic recession. The Dow Jones Industrial Average fell by 1,068 points, a 2.7% drop; the Nasdaq Composite Index plummeted by 6%; and the S&P 500 Index slid by 4.2%.

Economic Recession Concerns + Fed Policy Worries

The main reason for the market decline is the growing concern of a US economic recession, exacerbated by last Friday's disappointing July employment report. Investors are also worried that the Federal Reserve is lagging in supporting a slowing economy after the rate cut. Instead, the Fed decided to keep rates at their highest level in twenty years last week.

Tech Stocks Hit Hardest

The previously hot artificial intelligence trading further intensified the market drop, with tech stocks taking the hardest hit this time:

• Nvidia plunged by 14%, having already dropped over 23% from recent highs.
• Apple fell over 6% as Warren Buffett's investment firm Berkshire Hathaway halved its stake in the company.
• Tesla, Broadcom, and AMD dropped by 10%, 7%, and 12%, respectively.

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Global Markets Follow Suit

Japan's Nikkei 225 Index Suffers Major Losses

Japan's Nikkei 225 index confirmed it entered a bear market, dropping by 12%, marking its worst day since the 1987 Wall Street Black Monday crash. The index closed at 31,458.42 points, a loss of 4,451.28 points, the largest point drop in history.

Japanese stocks plunged by 6%, forced unwinding of carry trades, yen continues to appreciate

European Markets and Bitcoin Hit

• Europe's Stoxx 600 index fell by 3%.
• Bitcoin dropped from nearly $62,000 on Friday to around $52,000 on Monday.
• The Chicago Board Options Exchange Volatility Index (CBOE Volatility Index) surged above 53, reaching its highest level since the early days of the 2020 COVID-19 pandemic.

US Treasury Yields Decline

As economic recession fears drive investors to seek bond safety, US Treasury yields declined. The 10-year benchmark Treasury yield fell to 3.67% on Friday, down from 4.20% the previous week, hitting the lowest level in a year.

Yen Carry Trades Unwinding Intensifies Pressure

The recent rate hike by the Bank of Japan ended the yen carry trade practice, causing the yen to appreciate against the US dollar, further intensifying pressure on the global markets.

Some experts believe this is a corrective pullback and that these levels quickly reached oversold territory.