US Stocks Plummet on First Day of the Month – Nasdaq Falls 3%
US stock markets experienced a sharp sell-off yesterday, marking the largest decline since August’s crash. Concerns that the Federal Reserve may need to cut rates by 50 basis points, coupled with a weak ISM Manufacturing PMI report, led traders to reassess their portfolios. Once again, tech stocks bore the brunt, with the Nasdaq suffering the most, dropping 3.02%. The S&P 500 followed, falling 1.97%, while the Dow closed down 1.48%.
US Treasury yields also declined as the likelihood of a 50-basis-point cut increased to 37%. The 2-year Treasury fell by 6.2 basis points to 3.865%, and the 10-year yield dropped by 7 basis points to 3.841%. The US dollar strengthened on its safe-haven status, though notably not against the yen, with the DXY index rising 0.2%.
Oil prices plunged, nearing nine-month lows, as reports emerged that a deal may be reached in Libya. Brent crude tumbled 4.9% to $73.75 per barrel, and WTI fell 4.4% to $70.34 per barrel. Gold prices initially declined but managed to recover later in the session, finishing just 0.3% lower at $2,492.60 an ounce.
Fear Gauge Surges in US Markets
What a difference a day—or in this case, a three-day weekend—can make for financial markets. Last Friday, the PCE inflation figure met expectations, spurring a rally in stocks. However, something appears to have shifted over the weekend, as Wall Street’s fear gauge, the VIX, soared, and the chances of the Fed cutting rates by 50 basis points rose from 30% to 37%.
Adding to market jitters was a US Department of Justice subpoena issued to Nvidia over potential antitrust violations. Yet, it seems the real driver behind the sell-off was the fear that Friday’s jobs report might mirror the weak figures from last month, rather than any concrete developments. With several trading sessions and critical updates still to come before Friday’s data release, it looks set to be a turbulent week for those on the trading frontlines.
Economic Event Calendar Gains Momentum
The macroeconomic event calendar is set to pick up pace today as the focus shifts towards the all-important US employment figures due later in the week. Early attention will be on Australia during the Asian trading session, with key GDP data scheduled for release. The expectation is for a 0.2% quarter-on-quarter increase, though traders anticipate volatility, as weak growth continues to clash with persistent inflation pressures for the Reserve Bank of Australia.
The European session looks relatively quiet today, but things will liven up as US markets open. Initially, attention will turn to Canada, where the Bank of Canada is expected to announce a 25-basis-point rate cut. Later, focus will shift back to the US for the week’s first employment data release: the JOLTS Job Openings report, which is expected to show 8.09 million available positions.
