Market Tumbles on Economic Fears
The stock market plunged on Friday, August 2nd, 2024, as concerns about a weakening U.S. economy gripped investors. The S&P 500 fell 1.8%, the Dow Jones Industrial Average dropped 1.5%, and the Nasdaq composite tumbled 2.4%.
The decline was triggered by a report showing a significant slowdown in U.S. job growth, exceeding economists' expectations. This news, coupled with other weak economic indicators, raised fears that the Fed might have kept interest rates too high for too long.
Analysts believe a rate cut is needed to stimulate the economy, but its effects could take months to materialize. "The Fed is snatching defeat from the jaws of victory," said Brian Jacobsen, chief economist at Annex Wealth Management. "They'll have to do something bigger than the traditional cut to avert a recession."
Traders are now betting on a 70% chance of a half-point rate cut in September, despite Powell's earlier statement against it.
The market's decline was further fueled by disappointing earnings reports from tech giants like Amazon and Intel. Amazon's stock fell 8.8%, while Intel's plummeted 26.1%.
The tech-heavy Nasdaq composite entered a correction, falling 10% below its record high. Other areas of the market, including smaller companies, also tumbled.
International stock markets and commodity prices also experienced losses, reflecting global concerns about the economy.
Despite the downturn, a recession is not yet a certainty. The Fed faces a delicate balancing act between controlling inflation and avoiding economic stagnation.