Stock Market Sell-Off Continues as US Economy Faces Recession Fears During Summer Months | Business Update

A significant summer sell-off is currently unfolding in global stock markets, causing nervous investors to continue selling due to another concerning development on Friday.

The US non-farm payroll figures, which indicate the number of jobs added to the US economy in the previous month and are closely monitored by financial markets, came in much lower than expected for July.

Only 114,000 jobs were created in the US economy during the month, a significant drop from the expected 175,000 jobs. This marks the weakest figure since December of last year and the second weakest since March 2020, when the pandemic began to escalate in the Western world.

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Furthermore, the unemployment rate in the US for July rose to 4.3%, exceeding the 4.1% projected by Wall Street, heightening concerns of a potential recession in the world’s largest economy.

Market experts had already begun to speculate about a potential recession after the US Federal Reserve chose not to decrease interest rates from the 5.25%-5.5% range they had been at since July last year. This speculation was exacerbated by data the following day indicating a decline in US manufacturing activity during July, putting downward pressure on US equities even before the jobs report.

All major US stock indices fell on Thursday, with the S&P 500 dropping by 2.5%, the Dow Jones Industrial Average by 1.9%, the Nasdaq by 3.3%, and the Russell 2000 by 3%.

Friday saw further declines, signaling a third consecutive weekly fall for the S&P 500 and the Nasdaq. The S&P 500 is currently at a level not seen since May and is officially in ‘correction’ territory, having dropped more than 10% from its peak in July.

Several individual stocks witnessed steep declines, with Snapchat’s owner, Snap, down 30% at one point, and chipmaking giant Intel down 28%. British chip designer Arm Holdings, listed on Nasdaq, also saw a 6% decline and has lost almost a quarter of its stock market value in the week. Amazon fell by 12% following disappointing trading updates.

Other asset classes also experienced declines, with the price of oil on track for a fourth consecutive weekly drop and the price of gold nearing its all-time high. US Treasuries saw increased demand, with yields falling as prices rose. Analysts anticipate a rate cut by the Fed next month.

Market experts expressed concerns about the slowdown in the labor market and predicted a rate cut in September by the Fed. European stocks followed suit with declines, while Japanese stocks experienced a significant sell-off following a surprise interest rate rise by the Bank of Japan.

The recent sell-off highlights a shift in market sentiment, where bad news for the economy is now viewed negatively due to the ongoing interest rate normalization by major central banks.

The current economic uncertainty has led to significant volatility across global markets, with many investors closely monitoring central bank decisions and economic indicators for further insights.