(New York) The New York Stock Exchange ended with a sharp fall on Monday, bordering on panic in the wake of the stock market rout, faced with fears of a recession in the United States and the appreciation of the yen.
The Dow Jones index, in its worst session since 2022, fell 2.60% to 38,703.27 points. The NASDAQ, where technology stocks are concentrated, at its lowest since May, is in correction territory, dropping 3.43% to 16,200.08 points.
The broader S&P 500 index, also posting its worst session in two years, fell 3.00% to 5,186.33 points.
The VIX index, known as the “fear index” because it measures market volatility, climbed during the session to its highest level since March 2020 when the COVID-19 outbreak struck and brought the global economy to its knees. It stood at 35.72 points, up 52%.
The market rout, with the Nikkei in Tokyo falling by 12.45%, was “the result of a combination of factors, between fear of a slowdown in the American economy and the unwinding of the carry trade” on the yen, stressed Peter Cardillo of Spartan Capital.
Hedge funds are shedding their “carry trade,” which involved borrowing yen at low rates to invest in risky assets, such as NASDAQ growth stocks.
But now that the yen is strengthening and the BoJ has opened the door to rate hikes, “money is flowing out of the stock market, particularly in Japan,” Mr. Cardillo noted.
Wall Street indices had begun to falter sharply on Friday after July employment figures showed the unemployment rate rose to 4.3% from 4.1%. Job creation slowed to 114,000 from 179,000 in June.
“We must nevertheless keep in mind that the job creation data has remained positive,” Peter Cardillo said.
CFRA’s Sam Stovall also says, “Investors have adopted a ‘shoot first, ask questions later’ mindset.”
The analyst also noted that news that billionaire Warren Buffett has sold half of his Apple stake since the second quarter, boosting his cash reserves rather than shares, has made the market nervous.
During the presentation of its results, the Berkshire Hathaway group (-3.41%) revealed that it had sold 49% of its shares in the Apple company, after having already sold 13% in the first quarter. Apple shares lost 4.82% to 209.27 dollars.
Elsewhere in the stock market, all 30 Dow Jones stocks ended in the red, as did all eleven SP 500 sectors, starting with the information technology sector (-3.78%).
Nvidia, the star stock on Wall Street since investors became excited about the development of generative artificial intelligence, fell 6.36% to $100.45.
Press reports, relayed by the specialist website The Information, have mentioned a possible delay of several months in the release of its new generation chips.
Alphabet fell 4.61% to $160.64 as Google was found guilty of anticompetitive practices involving its search engine, including through contracts that imposed it as the default software on devices, according to a decision handed down Tuesday by a Washington judge.
According to documents seen by AFP, the judge said that “after carefully studying the testimony and evidence, the court came to this conclusion: Google is a monopoly and it has acted in such a way as to maintain this monopoly.”
Banks ended in poor shape as investors looked more confident that the Federal Reserve would cut rates.
Citigroup dropped 3.42%, Bank of America -2.47% and JPMorgan -2.13%.
Shares in Kellanova Group, a maker of breakfast waffles and snacks, were in high demand (+16.23% to $73.20), while chocolate bar giant Mars (unlisted) is reportedly targeting a buyout that could amount to $30 billion, according to the Wall Street Journal.
In the bond market, borrowing rates on government debt securities have sunk to their lowest in more than a year for 10-year yields (at 3.77% around 4:20 p.m. Eastern time) reflecting a flight of investments to safety, while the price of Treasury bonds rises when their yields fall.
The yen takes off
Against the current, the yen is showing a spectacular surge, taking advantage of its status as a safe haven.
The Japanese currency rose 1.79% against the dollar, to 143.94 yen per dollar, and 1.35% against the euro, to 157.73 yen per euro.
Other safe havens, the Swiss franc gained 0.73% to 1.1727 dollars per franc.
Conversely, bitcoin, considered a risky asset, has fallen by almost 13% since Friday evening.
The technology sector in red
Highly valued technology stocks are faltering in the face of the macroeconomic environment and doubts about the sector’s growth prospects.
Within the S&P 500 index, the information technology sector is the one that suffered the most: -2.92%.
In New York, Nvidia fell 5.91%, Tesla dropped 3.38%, Alphabet 2.20%, Apple 4.08%, Amazon 4.07%, Meta 2.27% and Microsoft 2.39%.
The Toronto Stock Exchange
The Toronto Stock Exchange is closed on this civic holiday, a statutory holiday in Ontario and across Canada. The S&P/TSX index remains unchanged.
Gold, which has a reputation for offering safety in times of crisis, lost almost 2%.
The Canadian Press