NEW YORK — Japan’s benchmark Nikkei 225 index rose more than 10% on Tuesday morning, a day after it sent markets in Europe and on Wall Street tumbling. Other markets in Asia appeared to have stabilized somewhat after the rollercoaster ride that started the week.
The terrifying Monday started with a dive abroad reminiscent of 1987 the stock market crash that swept the world and left Wall Street in stitches steeper losses, as the fear of a to delay US economy.
The Nikkei rose nearly 11% on Tuesday morning before falling again to close 8.7% higher at 34,211.83 as investors sought bargains after a 12.4% drop the day before.
Monday is the S&The P 500 fell 3% for its worst day in nearly two years. The Dow Jones Industrial Average fell 1,033 points, or 2.6%, while the Nasdaq Composite fell 3.4%, as Apple, Nvidia and other Big Tech companies that were once the stars of the stock market continued to fade.
The declines were the latest in a global sell-off that began last week, and it was the first chance for Tokyo traders to react to Friday’s report showing the U.S. dollar employers slowed down their hiring last month by much more than economists had expected. That was the latest piece of data on the U.S. economy to come in weaker than expectedand it has all fueled fear Federal Reserve has slowed the US economy down too long and too much by high interest rates in the hope of the suppression of inflation.
Professional investors warned that some technical factors could amplify the market action and that the declines could be overdone, but the losses were still neck-breaking. South Korea’s Kospi index fell 8.8% and bitcoin fell below $54,000 on Friday from more than $61,000.
Even gold, known for its safety in turbulent times, fell about 1%.
Elsewhere in Asia, Hong Kong’s Hang Seng index rose 1.1% to 16,876.98 on Tuesday morning and the Kospi jumped 3.5% to 2,526.20. Taiwan’s Taiex rose 1.2% and in Australia the S&The P/ASX 200 rose 0.3% to 7,675.90.
The Shanghai Composite index, largely bypassed by the previous day’s drama, rose 0.2% to 2,865.06.
Monday’s collapses reflected fears that the damage to the economy from prolonged high interest rates is so severe that the Federal Reserve will have to cut rates in an emergency meeting before its next scheduled decision on Sept. 18. The yield on the two-year Treasury note, which closely tracks Fed expectations, briefly fell below 3.70% early morning from 3.88% Friday night and 5% in April. It later recovered to 3.89%.
“The Fed could ride in on a white horse to save the day with a big rate cut, but the case for an inter-meeting cut seems weak,” said Brian Jacobsen, chief economist at Annex Wealth Management. “Those are typically reserved for emergencies like COVID, and a 4.3% unemployment rate doesn’t seem like much of an emergency.”
Naturally, the US economy is still growingThe U.S. stock market is still up for the year, and a recession is far from certain. The Fed has been clear about the tightrope walk it began when it began raising rates sharply in March 2022: being too aggressive would strangle the economy, but being too soft would give inflation more oxygen and hurt everyone.
Some of the recent declines on Wall Street may just be hot air being sucked out of a stock market that has hit dozens of record highs this year, thanks in part to a madness surrounding artificial intelligence technology. Critics have been saying for some time that the stock market looks expensive after prices rose faster than corporate profits.
“Markets typically move up like they’re climbing stairs, and they go down like they’re falling out of a window,” said JJ Kinahan, CEO of IG North America. He attributes much of the recent worry to the euphoria surrounding AI waning, with increasing pressure on companies to show how AI can deliver profits, and “a market that got ahead of itself.”
The only way to make stocks look cheaper is to either make prices fall or make profits rise. Expectations for the latter are still high, with growth for S&The P500 profit in the past quarter appears to be the highest since 2021.
Professional investors also pointed to the Bank of Japan’s move last week to raise its key interest rate from near zeroSuch a move helped boost the value of the Japanese yen, but it also prompted traders to pull out of deals where they borrowed money for virtually no cost in Japan and invested it elsewhere in the world.
Treasury yields also pared their losses Monday after a report showed growth in U.S. service companies was slightly stronger than expected. The growth was led by arts, entertainment and recreation companies, along with accommodations and food services, according to the Institute for Supply Management.
Still, stocks of companies whose profits are most closely tied to the strength of the economy suffered steep losses on fears of a slowdown. Small companies in the Russell 2000 Index fell 3.3%, wiping out the rally that it and other stricken areas of the market had experienced.
To make matters worse for Wall Street, Big Tech stocks plummeted as the market’s hottest trading platform continued to unravel for much of this year. Apple, Nvidia and a handful of other Big Tech stocks, known as the ” Beautiful Seven “had propelled the S&P500 is hitting record after record this year, while high interest rates are putting pressure on much of the rest of the stock market.
But Big Tech’s momentum turned last month amid concerns that investors had pushed prices too high and expectations for future growth were too hard to achieve. A series of disappointing earnings reports that began with updates from Tesla And Alphabet worsened pessimism and accelerated the decline.
Apple fell 4.8% on Monday after Warren Buffett’s Berkshire Hathaway announced it has reduced his ownership interest in the iPhone maker.
NvidiaThe chip company that has become the poster child for Wall Street’s AI bonanza fell even further, 6.4 percent. Analysts cut their profit forecasts for the company over the weekend after a report from The Information said Nvidia’s new AI chip has been delayed. The recent selling has cut Nvidia’s profit for the year to nearly 103 percent from 170 percent in mid-June.
Another major tech giant, Alphabet, fell 4.4% after a US judge ruled that Google’s search engine is illegally abusing his dominance to suppress competition and stifle innovation.
All in all, the S&The P 500 fell 160.23 points to 5,186.33. The Dow fell 1,033.99 to 38,703.27 and the Nasdaq Composite fell 576.08 to 16,200.08.
Concerns beyond corporate profits, interest rates and the economy are also weighing on the market. War between Israel and Hamas worsen, which, beyond the human toll, could cause sharp swings in oil prices, adding to broader concerns about potential hot spots all over the world, while upcoming US elections could confuse matters even further.
Wall Street is concerned about the impact of November’s policies on markets, but the wild swings in stock prices could also have implications for the election itself.
The threat of a recession is likely to put Vice President Kamala Harris on the defensive. But slower growth could also push inflation lower and force former President Donald Trump to shift from his current focus on higher prices to outlining ways to revive the economy.
“It comes down to jobs,” said Quincy Krosby, chief global strategist for LPL Financial. Jobs drive U.S. consumer spending, which in turn is the largest part of the U.S. economy.
“As Election Day approaches, the unemployment rate will be extremely important.”
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AP Business writers Matt Ott, Christopher Rugaber and Damian J. Troise contributed.