Stock Market Update: Stocks Plummet as Markets Fear Fed Rate Mistake

Yesterday, stocks took a steep dive following a weak manufacturing activity report for July, which showed the lowest reading in eight months for the world's largest economy. This downturn has fueled worries that the Federal Reserve’s decision not to lower interest rates might be stalling growth and increasing the risk of a recession. Jamie Cox, managing partner at Harris Group Financial, noted, "Investors are grappling with whether the manufacturing data represents a one-off event or a slow slide toward a recession."

Additionally, troubling employment data exacerbated market fears. Reports indicated weaker-than-expected jobless claims and a notable decline in corporate hiring intentions, the lowest since 2012.

The bond market, typically a haven for investors during stock market turmoil, also reflected the growing anxiety. Treasury bond yields dropped sharply, with 10-year note yields falling below 4% for the first time since February, now at 3.942%. Similarly, 2-year note yields, which are more sensitive to interest rate changes, fell to 4.115%, the lowest since May of last year.

The CME Group's FedWatch tool indicates a 29.5% probability of a significant 50 basis point Fed rate cut in September, highlighting the market's anticipation of more aggressive measures to counteract the economic slowdown.

Today’s focus will be on the July employment report, expected to show another decline in hiring and subdued wage growth. Initial predictions of 177,000 new jobs have been revised to a range of 140,000 to 180,000, reflecting the week's weaker data.

On Wall Street, futures suggest a grim start with the S&P 500 expected to open 69 points lower. The Dow Jones Industrial Average is projected to drop 425 points, and the tech-heavy Nasdaq is set for a 350-point decline.

In company-specific news, Apple (AAPL) shares rose 0.4% pre-market after reporting better-than-expected third-quarter earnings and positive future sales and margin forecasts. Conversely, Amazon (AMZN) saw an 8.5% drop following a mixed second-quarter earnings report and plans for increased capital spending on AI projects.

Intel (INTC) shares plummeted over 20% pre-market, hitting levels not seen since the mid-1990s. The chipmaker announced a muted sales forecast, plans for a 15% workforce reduction, and suspended its quarterly dividend.

European markets also faced declines, with the regional Stoxx 600 down 1.67% and Britain's FTSE 100 falling 0.52%. In Asia, Japan's Nikkei 225 experienced its biggest single-day drop since the pandemic, falling 5.08%, while the broader Topix index had its worst day since 2016. The MSCI Asia ex-Japan benchmark closed 2.44% lower.

Also Read: Stock Market Update: S&P 500 and Nasdaq Gain After Fed Decision, Meta Shares Surge