Highlights
Risk-off panic fueled a global meltdown in equities Monday with margin call selling and contagion fueling successive rounds of losses in U.S. markets and elsewhere. Still, U.S. stocks recovered about half of the day's losses from the morning's worst levels and U.S. Treasury yields reversed to end mostly higher after plunging in the early going. Even so, the S&P 500 suffered its worst one-day loss in nearly two years.
The Dow Jones industrial average fell 2.6 percent, the S&P 500 lost 3.0 percent and the Nasdaq dropped 3.4 percent. The major averages saw big losses for a third successive day with losing stocks heavily outnumbering winners. Bond yields edged up, the dollar weakened, and oil prices rebounded to close higher.
Friday's big losses on Wall Street fueled even bigger losses in Tokyo equities as many hedge funds and other big players at once reversed the popular carry trade based on borrowing at low rates in Japan and buying risk assets in U.S., including the Magnificent Seven. Their losses in turn fueled a stampede of selling in Japanese equities and more panicked long liquidations globally, which pushed down U.S. equities, with the Nasdaq futures down 6.5 percent just before the U.S. cash open.
Sentiment recovered at midmorning in New York after a better than expected U.S. Institute for Supply Management services report showed a return to expansion in July, with notable improvement in new orders and employment. That soothed fears about an imminent U.S. recession that had built up since weaker than expected readings from the ISM on manufacturing and Friday's employment report. The ISM services data triggered a big reversal in U.S. Treasuries with the 2-year note yield ending up 2 basis points after being down 23 basis points on safe-haven flows at the U.S. open.
Among sectors, big technology stocks suffered the most with big names like Microsoft down 3 percent and Nvidia down 6 percent. Other featured losers included energy, autos, airlines, homebuilders, paper/packaging, and names linked to crypto. Holding up best though still lower were defensive plays like discount stores, food, health & personal care, hospitals and utilities.
Markets were pricing a 30 percent chance of an emergency intermeeting rate cut ahead of the September FOMC meeting Monday morning but had priced that back out by the close. Chicago Fed President Austan Goolsbee said the Fed was in position to wait for more information headed into the September policy meeting and was unlikely to react to one month of data. Fed funds futures are pricing in a 50 basis point cut at the September meeting.
The Dow Jones industrial average fell 2.6 percent, the S&P 500 lost 3.0 percent and the Nasdaq dropped 3.4 percent. The major averages saw big losses for a third successive day with losing stocks heavily outnumbering winners. Bond yields edged up, the dollar weakened, and oil prices rebounded to close higher.
Friday's big losses on Wall Street fueled even bigger losses in Tokyo equities as many hedge funds and other big players at once reversed the popular carry trade based on borrowing at low rates in Japan and buying risk assets in U.S., including the Magnificent Seven. Their losses in turn fueled a stampede of selling in Japanese equities and more panicked long liquidations globally, which pushed down U.S. equities, with the Nasdaq futures down 6.5 percent just before the U.S. cash open.
Sentiment recovered at midmorning in New York after a better than expected U.S. Institute for Supply Management services report showed a return to expansion in July, with notable improvement in new orders and employment. That soothed fears about an imminent U.S. recession that had built up since weaker than expected readings from the ISM on manufacturing and Friday's employment report. The ISM services data triggered a big reversal in U.S. Treasuries with the 2-year note yield ending up 2 basis points after being down 23 basis points on safe-haven flows at the U.S. open.
Among sectors, big technology stocks suffered the most with big names like Microsoft down 3 percent and Nvidia down 6 percent. Other featured losers included energy, autos, airlines, homebuilders, paper/packaging, and names linked to crypto. Holding up best though still lower were defensive plays like discount stores, food, health & personal care, hospitals and utilities.
Markets were pricing a 30 percent chance of an emergency intermeeting rate cut ahead of the September FOMC meeting Monday morning but had priced that back out by the close. Chicago Fed President Austan Goolsbee said the Fed was in position to wait for more information headed into the September policy meeting and was unlikely to react to one month of data. Fed funds futures are pricing in a 50 basis point cut at the September meeting.
Definition
Market Reflections track market reaction to the trading day's major events. Economic data, policymaker speeches, and company news are featured in this report as well as key indexes and financial instruments.
Description
Understanding why markets respond as they do is fundamental for an investor. Market Reflections help explain how the day's events, news, and data impact the outlook for the economy and for market prices.
