Global stock markets end the day sharply lower

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There is always a lag between when rates go up and when the economy sees the full effects. That gap is generally between 9-15 months and is called the monetary lag. 

By now, the Federal Reserve’s cumulative rate hikes are weighing down employment, which is always among the last bits of the economy to feel the effect. Why? Because companies are reluctant to lay off staff and take on new employees.

This is what we are seeing now. The Fed’s medicine has crushed inflation, but it’s also causing companies to lay off or not hire more staff.

So does the Fed need to start paring back its rate hike medicine before there’s any real damage to the economy? We don’t know and won’t know for many months ahead because the US economy is set for the time being.

Even if the Fed starts cutting rates next month, remember the monetary lag? One cut won’t make any difference. Two or three before the end of the year will have an effect ….by the spring of next year.

The biggest danger here is that everyone sees the market falling and gets panicked. Spending stops; worries grow; more jobs are lost; more spending stops; and a self-fulfilling downward spiral feeds on itself, making a bad situation worse. If the market continues to drop, the falling “wealth effect” we all feel will take its toll.

But there is one positive side: Back in 2022, when rates were at zero, the worry was the Fed had little room to maneuver to boost the economy. Today there are 500 basis points of interest rates that can be cut, cut and cut again. The Fed can certainly get the economy into a better place …but probably not before we’ve all suffered a bit more pain.

S&P 500 futures bounced in overnight trading, providing some potential relief after Monday’s brutal trading session during which the index shed a colossal $1.3 trillion in value.

S&P 500 futures jumped 1% on Monday evening shortly after futures trading opened, while Dow Jones Industrial Average futures rose 0.62%. Tech-focused Nasdaq 100 futures rose about 1.3%.

The overnight rebound came after all three major indexes suffered a major sell-off during Monday’s trading day, sparked by fears that the US economy is slowing faster than expected.

Apple was hit particularly hard in Monday’s market sell-off. Shares of the tech giant shed nearly 5% after Warren Buffett’s Berkshire Hathaway revealed on Saturday that it had sold nearly 50% of its Apple stock.

In its second-quarter earnings report, Berkshire Hathaway disclosed that it had 400 million shares in Apple, dropping from 790 million shares.

In the past, Buffett said that he liked Apple as an investment because there are “hundreds millions of people who practically live their lives” on their iPhones.

Apple closed at its lowest level in nearly six weeks on Monday.

Stocks closed deep in the red for a second day in a row on Monday as questions swirl over whether the US economy is in a recession following Friday’s unexpectedly weak jobs report. Investors are increasingly hopeful that will push Federal Reserve officials to come to their rescue with an emergency rate cut.

That almost certainly won’t happen.

“There’s nothing in the Fed’s mandate that’s about making sure the stock market is comfortable,” Chicago Fed President Austan Goolsbee said in a New York Times interview on Monday.

In hindsight, there’s a strong case to be made for why the central bank should have cut its benchmark lending rate at its meeting last week, which concluded before the jobs report came out. Had officials known the unemployment rate was going to jump from 4.1% in June to 4.3% in July, almost a full percentage point higher than where it was at the start of this year, perhaps they would’ve been more convinced the US economy is weakening enough that the benefits of a cut outweigh the risks.

But calling an unscheduled meeting now to lower rates ahead of the central bank’s next scheduled meeting that’s more than six weeks away would be counterproductive, fueling more panic.

Read more here.

San Francisco Federal Reserve President Mary Daly acknowledged Monday that there are concerns about whether the US economy will “continue to deteriorate and softening will turn into weakness.”

“We don’t see that right now,” she said Monday, speaking at an event hosted by the Hawaii Executive Collaborative. Last month’s unexpectedly weak jobs report isn’t convincing her that the central bank needs to make any urgent moves. “We’re slowing but not falling off a cliff,” added Daly, who is voting on monetary policy decisions this year.

“I’ll be watching very carefully to see if the next labor market report continues to suggest that kind of same number or same dynamic, but that could also reverse.” Her general sense from recent conversations with business owners is that “firms are not laying workers off, firms are simply slowing their pace of hiring.” If the state of the economy was deteriorating, you’d see more layoffs, she said.

She suggested that a rate cut at the Fed’s next meeting would be merited but declined to share how big a cut she feels could be appropriate.

The S&P 500 declined sharply by Monday’s market close, despite easing off its session lows.

The benchmark index lost a whopping $1.3 trillion in market value on Monday, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

A trader works on the floor of the New York Stock Exchange (NYSE) ahead of the closing bell in New York City on August 5.

Stocks ended a turbulent trading session on a dour note as investors feared that the US economy is on shaky legs.

The Dow plunged 1,034 points, or 2.6%. The S&P 500 dived 3% and the Nasdaq Composite slid 3.4%.

The blue-chip Dow and benchmark S&P 500 index notched their biggest daily percentage loss since 2022, when the Federal Reserve’s aggressive rate-hiking cycle helped send the S&P 500 into a bear market.

Monday marks just the 15th time the Dow has shed more than 1,000 points in a single session, according to FactSet data.

Also on Monday, Japanese stocks suffered their biggest daily losses since 1987 as fears about a US economic slowdown sent shock waves through global markets.

Pedestrians walk in front of monitors displaying the Nikkei 225 Stock Average figure outside a securities firm on August 5 in Tokyo, Japan.

Oil prices fell. West Texas Intermediate crude futures, the US benchmark, settled at $72.94 a barrel. Brent crude futures, the international benchmark, settled at $76.30 a barrel.

Downdetector reported that popular online trading platforms including Fidelity, E-Trade and Robinhood ran into technical difficulties Monday as investors rushed to shed stocks.

The US market’s losses on Monday extend the market’s steep selloff on Friday, after a dreary July jobs report rattled Wall Street.

Traders see a 85% expectation that the Fed will cut rates by half a point the next time it reconvenes, in September, according to the CME FedWatch Tool.

Some experts, including famed Wharton professor emeritus of finance Jeremy Siegel, have called for the Fed to call an emergency meeting to cut rates before then. The central bank last took such action in March 2020, at the onset of the Covid pandemic.

Still, other economists and investors have argued that the market is overreacting to recent economic data, with some even recommending Monday’s carnage as a buying opportunity.

“Evidence certainly points to a slowing economy. But slowing and slow are two very different points,” Jack Janasiewicz, lead portfolio strategist at Natixis Investment Managers, wrote in a Friday note. “Lower prices certainly can have a massive psychological effect. But investors need to step back and look at the fundamental story, which still remains decent.”

As stocks settle after the trading day, levels might change slightly.

A housing development in Middlesex, Pa., is shown on Friday, on March 29.

The 10-year Treasury yield, considered a key benchmark for mortgage rates, fell sharply after Friday’s weaker-than-expected jobs data sparked recession fears. The average 30-year fixed mortgage rate dropped to 6.34% on Monday, the lowest level so far this year, according to Mortgage News Daily.

“Every mortgage rate and price is heavily weighted to the 10-year Treasury yield,” said Phil Crescenzo, a vice president at Nation One Mortgage Corporation. “It’s kind of like our report card for the health of the market, so that’s why it’s watched so closely.”

However, while Friday’s weaker job data has all but assured that the Federal Reserve will begin cutting rates in September, Crescenzo said potential homebuyers should be cautious about waiting on the sidelines.

Mortgage rates have already moved lower in anticipation of a September rate cut. Once the Fed makes its move, more potential homebuyers may enter the market, creating more competition for existing homes currently on sale, he said.

While the Fed does not directly set mortgage rates, its interest rate decisions affect borrowing costs throughout the economy.

All three major US stock indexes are on pace for their worst day since 2022, with barely 30 minutes to go until the market closes.

The Dow declined 1,088 points, or 2.7%. The S&P 500 fell 3.3% and the Nasdaq Composite fell 3.95%.

That puts all three indexes on track for their biggest daily percentage loss in roughly two years.

US dollars banknotes.

The greenback just weakened to its lowest level in eight months as Wall Street bets that the Federal Reserve will cut interest rates more aggressively than previously thought.

The US Dollar Index, which captures the currency’s strength against six of its peers, fell on Monday to a intraday low of 102.18. That’s the dollar’s weakest performance since December, though it gained some ground by midday. The index is on track to close at its lowest level since January, extending a steep decline that began Friday when the latest batch of labor data showed that the US job market might be deteriorating.

Signs of the US economy’s resilience, coupled with the Fed’s stance of keeping rates higher for longer, helped boost the dollar earlier this year. The dynamics are a lot different now: Inflation has resumed a downward trend, unemployment rose last month to its highest point since October 2021 and the Fed gave some key hints at its policy meeting last week that it will likely cut rates in September.

“The stronger dollar prevails as the Fed’s ‘higher for longer’ mantra remains intact, although as the currency market perceives that the Fed is firmly committed to initiating an easing cycle, the dollar should soon soften vis-à-vis its global peers,” analysts at LPL Financial wrote in a note to clients Monday. “The dollar should ease as monetary policy transitions towards a more moderate stance with either concerns over the economic landscape or declining inflation serving as catalysts.”

Nvidia's founder and CEO Jensen Huang speaks during the annual Nvidia GTC Artificial Intelligence Conference at SAP Center in San Jose, California, on March 18.

Shares of the Magnificent Seven, the Big Tech stocks that have led markets higher in 2024, are tumbling.

Nvidia shares, which have been the biggest beneficiary of Wall Street’s artificial intelligence frenzy this year, slid 7.3% on Monday.

Shares of Alphabet fell 4.4%, but were off their lows of the session. That’s even after a federal judge ruled in a staggering court defeat for the tech behemoth that Google has violated US antitrust law with its search business.

Tesla shares sank 5.2%, Meta Platforms slipped 2.5%, Amazon shares lost 4.1%, Microsoft shares declined 3.3% and Apple shares shed 6.4%.

Stocks were back near their lows of the session by mid-afternoon Monday.

The Dow slid 1,051 points, or 2.6%. The S&P 500 declined 3.3% and the Nasdaq Composite slipped 4.1%. That comes after stocks had pared a large part of their early morning losses by midday.

Still, the VIX, Wall Street’s fear gauge, remained off its session highs. The measure was at 34 by mid-afternoon.

CNN’s Fear & Greed gauge was at “extreme fear.”

Stock market information is seen displayed at the Nasdaq MarketSite in New York, on Monday, August 5.

Americans might be tempted to empty their stock portfolios after seeing July’s jobs report and Monday’s market carnage. Investors say that’s a bad idea.

Stocks are extending their declines from Friday, when a dismal jobs report spurred fears that the US economy is on shaky legs.

“You never want to indiscriminately pull money out of the market because timing the market re-entry correctly is extremely difficult, causing investors to potentially miss out on rebounds and future growth. If anything, what we are seeing is the benefits of a balanced portfolio,” said Christian Salomone, chief investment officer at Ballast Rock Private Wealth.

Mark Hackett, Nationwide’s chief of investment research, said investors should use Monday’s selloff as a buying opportunity. He recommended seeking out bargains in small-cap, value and international stocks.

The Charles Schwab and TD Ameritrade logos are displayed on the door of a Charles Schwab Corporation branch in Torrance, California, on March 13, 2023. 

Brokerage company Charles Schwab said Monday it had resolved an issue where its clients were having trouble logging on amid a global stock selloff.

“Due to a technical issue, some clients may have difficulty logging in to Schwab platforms,” said the company, which also runs TD Ameritrade, in a statement on X on Monday. “Please accept our apologies as our teams work to resolve the issue as quickly as possible.”

Downdetector reported that several other popular online trading platforms, including Fidelity, E-Trade and Robinhood, also experienced technical difficulties as stocks decline around the world.

Fidelity responded to consumer complaints on social media, noting that it was aware some customers were having trouble logging on, but that the issue was “now resolved.”

Robinhood is also currently operational, according to a company spokesperson.

E-Trade did not immediately respond to a request for comment.

An aerial view of Exxon Mobil’s oil refinery, in Beaumont, Texas, in March 2023.

Oil prices were still lower by Monday midday.

West Texas Intermediate crude futures, the US benchmark, fell 0.8%, to $72.92 a barrel. Brent crude futures, the international benchmark, declined 0.1%, to $76.31 a barrel.

Crude prices have tumbled recently on concerns that a US recession could hurt oil demand. While there are no immediate signs of a recession, unemployment has risen for the past four months and interest rates remain at a 23-year high. Concerns about weak Chinese demand are also weighing on prices.

That’s despite fears that the Israel-Hamas war could widen after Iran threatened to avenge the killing of Hamas’ political leader in Tehran last week. Oil prices surged when the war first broke out last year, as investors worried that it could spread to other oil-producing areas of the Middle East.

Traders work on the floor of the New York Stock Exchange on August 5.

Stocks began nearing their lows of the session again midday Monday.

The Dow was 916 points, or 2.3% lower. The S&P 500 fell 2.7% and the Nasdaq Composite slid 3.2%.

CNN’s Fear & Greed index remained at an “extreme fear” reading.

It’s easy to see the Dow sinking 1,000 points and shift, as PNC Chief Investment Officer Amanda Agati said, from a mentality of “’heading for a successful soft landing’ to ‘omg save yourself, even cash isn’t safe.’”

But don’t do that.

There are three reasons the market is melting down today: Jobs, the Fed and AI. None of them are great news. But also none are that bad.

On jobs, UBS economists this morning noted that the unemployment rate surging to 4.3% is worrying: “Such a rapid rise in unemployment in the past has often been associated with an abrupt slowing of economic growth.” Oof. But Goldman Sachs economists told investors this morning to keep a cool head.

“We are hesitant to take the July jobs numbers as a new trend,” Goldman’s chief economist Jan Hatzius wrote in a note to clients. “It is usually a mistake to infer too much from one jobs report, absent a major shock that abruptly changes the picture.”

Goldman economists said the totality of the data, including millions of job openings, shows the labor market is not rapidly deteriorating as today’s market meltdown suggests.

The Fed may have acted too late on rate cuts. But it has a ton of leverage, including multiple big rate cuts, to get its inflation and jobs balancing act back into equilibrium. Remember: Rates are at a 23-year high. And the Fed was not hesitant to take rates from zero to the current level in record time to fight inflation.

And on tech: OK, we might have gotten a little carried away with how AI is going to change the world overnight. ChatGPT is cool, but it’s not about to start a new industrial revolution or anything. Not yet, anyway.

But tech is still up this year. Like… way up. Apple’s stock is up 10%. Microsoft is up 6%. And AI darling Nvidia is up 104%, thank you very much.

Overall, the S&P 500 is still up 12% this year. Stocks were due for a letdown at some point. It’ll be fine.

People walk by the New York Stock Exchange in the Financial District in New York City on August 5.

The stock market’s losses continued to ease off.

The Dow was 750 points, or 1.9% lower. The S&P 500 declined 2.1% and the Nasdaq Composite lost 2.5%.

Investors’ fear seemed to abate somewhat, too. The VIX, known as Wall Street’s fear gauge, was at roughly 34 after surging to 65 earlier Monday.

Traders work on the floor of the New York Stock Exchange (NYSE) on August 5.

Stocks were still substantially lower Monday morning but off their lowest levels of the day.

The Dow fell 866 points, or 2.2%, after nosediving more than 1,000 points earlier in the session. The S&P 500 fell 2.5% after falling more than 4%, and the Nasdaq Composite was 3% lower after tumbling more than 6%.

A hiring sign is displayed at a retail store in Schaumburg, Ill., on July 10.

America’s wide-ranging services sector strengthened last month, according to one measure, after it suddenly contracted in June.

As US markets contend with recent data showing the job market might be deteriorating, the Institute for Supply Management’s latest read on the services sector underscores how noisy economic data can be.

ISM’s Services Purchasing Managers Index, a collection of surveys that gauge economic activity among America’s service-providing businesses, registered at 51.4 in July, up from a reading of 48.8 in June. That shows the services sector — ranging from restaurants to dental clinics — is growing again, since a reading above 50 indicates expansion while anything below that threshold points to a contraction.

It also illustrates how one bad report doesn’t necessarily point to doom and gloom.

“The uptick in the ISM services index will do little to reverse market jitters of a recession in the wake of Friday’s employment report, but it aligns with our view of an economy in transition rather than one on the brink of collapse,” Matthew Martin, economist at Oxford Economics, said in a note Monday.

ISM’s latest release shows that many parts of the services sector — from employment to output — shifted into growth territory last month. James Knightley, chief international economist at ING, said in a note Monday that “the latest ISM services report suggests the situation looks ok with the economy growing, adding jobs and with inflation above target.”

Financial markets are currently jolted by Friday’s disappointing jobs report, which showed that the unemployment rate jumped to a 4.3% rate last month as monthly job growth slowed more than expected.

That situation is a little different: Unemployment has been steadily rising for a few months now, so there’s already been a clear upward trend in place. The uncertainty over whether or not it will continue to rise is unsettling investors, but as the ISM report showed, it’s still possible for the job market to rebound.

The market plunge has rapidly intensified following Friday’s lackluster jobs report: On Monday morning, market volatility reached its highest level since the onset of Covid.

But some analysts think that investors are overreacting. The economy, they say, is fine. This is instead an outsized reaction to worry that the Federal Reserve didn’t lower interest rates fast enough.

“The market panic appears disproportionate,” wrote EY chief economist Gregory Daco, in a note to clients Monday. “In our opinion, the core issue lies with the Fed being behind the curve, in action and in thought, rather than a significant economic downturn.”

Joseph Brusuelas, chief economist at RSM US, said this is a “classic market panic.” It’s important to remember, he added, that the market is not the economy.

Jim Smigiel, chief investment officer at SEI, echoed that sentiment. “Quite frankly, this selloff is now overdone,” he wrote.

While some investors have been floating the idea of an emergency Fed cut to temper the market tantrum, many economists don’t think it’s a likely solution.

There could, however, be more cuts than anticipated this year.

“In our view, the likelihood of three rate cuts this year has increased from two,” wrote Daco, who now predicts cuts at the Fed’s next three meetings, in September, November and December.

Still, he cautioned, “it’s crucial to remember the Fed’s hawkish and inflation wary stance, if the economy does not deteriorate significantly.”

US stocks have recovered slightly from their Monday morning freefall but are still down significantly.

The blue-chip Dow is 939, or 2.4% lower. The S&P 500 has dropped 2.6% and the tech-heavy Nasdaq is down 3%.

Traders work on the floor of the New York Stock Exchange on August 5.

Stocks continued to tumble Monday mid-morning.

The Dow was down by 950 points, or 2.4%. The S&P 500 fell 2.6% and the Nasdaq Composite lost 3%.

The VIX, Wall Street’s fear gauge, pared back its earlier climb. The measure was at 40 after spiking to more than 65 earlier on Monday.

Job seekers attends the JobNewsUSA.com South Florida Job Fair held at the Amerant Bank Arena on June 26 in Sunrise, Florida. 

America’s job market seems to be deteriorating and inflation is within reach of the Federal Reserve’s 2% target, setting the stage for the central bank to begin cutting interest rates as soon as next month.

Rising unemployment is an urgent problem for the Fed, since in addition to stabilizing prices, the Fed is also responsible for maximizing employment. Economists say that once unemployment starts rising, it tends to catch momentum and continue to ascend. Not only does the Fed have enough of a reason to begin cutting, it may do so aggressively to prevent the job market from faltering any further.

“The Fed will do three rate cuts, in September, November and December, because the Fed doesn’t want to cut rates and then pause and then cut,” Gene Goldman, chief investment officer at Cetera Investment Management, told CNN. “They want to get the rate cuts out of the way and then stop.”

The futures market is pricing in a half-point cut in September, followed by another reduction of half a point in November, then a quarter-point cut in December, according to the CME FedWatch Tool. A weakening job market, which tends to suddenly take a turn for the worse, is demanding a forceful response from the Fed.

Fed officials penciled in just one rate cut in their latest economic projections from June, down from three in March, which mostly reflected inflation stalling in the first three months of the year. The situation is starkly different now, so officials’ estimates for interest rates will likely be revised during their September 17-18 meeting, when they update their economic forecasts.

People shop in a Manhattan store on July 5 in New York City. 

Investors are taking recent economic data as signs that the US economy could be headed for a slowdown.

But what are America’s biggest corporations, which have their finger of the pulse of the consumer, saying?

Consumer spending accounts for about two-thirds of US economic output, meaning that everyday Americans and how they spend their dollars is a key component of how healthy the economy is.

Corporate earnings have showed a mixed portrait of the American consumer. They are being more picky with where they spend their dollars and are seeking deals. That’s led some fast food restaurants including McDonald’s, Starbucks, Burger King, Wendy’s to report less foot traffic and decreasing sales.

While wealthy consumers have helped keep spending robust in recent years, luxury goods retailers have also reported a slowdown in spending. British luxury brand Burberry issued a profit warning and scrapped its dividend earlier this year.

Still, other companies have raised their forward-looking guidance and reported seeing a resilient consumer.

Meta Platforms upped its 2024 revenue outlook in quarterly results reported last week. PayPal raised its full-year forecast for growth in transaction margin dollars and earnings. Mastercard said it remains positive about its growth outlook.

Plus, S&P 500 companies have reported a healthy 12% growth in second-quarter earnings from the prior year so far this season.

Traders work on the floor of the New York Stock Exchange on August 5.

Traders received news that the labor market is slowing at a less-than-ideal time for Wall Street.

Here are some key factors that made the market exposed to a pullback, according to RBC Capital Markets.

The front of the New York Stock Exchange building is seen in New York City on August 2.

Stocks clawed back some of their earlier losses Monday mid-morning.

The Dow tumbled 893 points, or 2.4%, after plunging more than 1,000 points earlier in the session. The S&P 500 declined 2.6% and the Nasdaq Composite slumped 3.3%.

CNN’s Fear & Greed Index, which measures seven barometers of market sentiment, fell to an “extreme fear” reading.

The VIX, known as Wall Street’s fear gauge, jumped to 43 after surging to more than 60 at its highs.

Federal Reserve Chairman Jerome Powell speaks at a news conference following a Federal Open Market Committee meeting at the William McChesney Martin Jr. Federal Reserve Board Building on July 31 in Washington, DC. 

The Federal Reserve’s rate-setting committee meets eight times a year to vote on where officials believe interest rates should be to promote maximum employment and stable prices.

But if something comes up in between those meetings that changes their views on the ideal level for rates, officials can gather for an unscheduled “emergency” meeting. The last time they did so was at the onset of the pandemic when they voted to lower rates by a half point on March 3. Then, less than two weeks after that, they met again to lower rates by a full point to near-zero levels.

At that point, the writing was on the wall: Things were getting ugly quickly. By doing two large emergency cuts in succession, Fed officials didn’t have to weigh whether their actions would unnecessarily cause Americans to panic.

But this time around, the Fed has to give much closer consideration to whether an emergency cut would hurt the economy more than it helps it. If it moves forward with an emergency cut, people would inevitably wonder: What does the Fed know about the economy that we don’t?

The last thing the central bank wants is for people to believe the economy is on the cusp of a potential recession. Those beliefs can quickly materialize, whether or not they are valid. So the best action the Fed can take right now is to send a message to markets that they will act at their next scheduled meeting in September to address the growing weakness in the economy.

People pass the New York Stock Exchange on Tuesday, July 30.

In recent weeks, investors have sold high-flying Big Tech shares in favor of smaller stocks that had been pummeled by the Federal Reserve’s interest rate hikes. This shuffle came after a slew of cooling inflation reports raised traders’ optimism that a September rate cut is in the cards.

Now, Wall Street believes a September rate cut is all but cemented — but signs that the labor market is weakening has sent Wall Street into a tailspin. All 11 sectors of the S&P 500 were lower on Monday.

The Russell 2000 index, which tracks the performance of US small-cap stocks, has tumbled more than 11% during the first few trading days of August after jumping 10.1% in July.

Fear is ravaging Wall Street, but some investors are eyeing opportunities to pick up beaten-down stocks.

Jamie Cox, managing partner at Harris Financial Group, said Monday markets were “rife for negativity” as investors found themselves grappling with diverging global central bank policies, a US presidential cycle with twists and turns, plus a potential escalation in the Israel-Hamas war.

“Selloffs that manifest themselves through wild swings in the currency markets are sharp and swift, but usually very short lived,” said Cox. “Some say this is overdue, I say use this downturn to pick up some deals.”

Austan Goolsbee, president and chief executive officer of the Federal Reserve Bank of Chicago, on November 28, 2023. 

Chicago Federal Reserve President Austan Goolsbee said Monday the Fed will react to any “deterioration” in the economy.

“The Fed’s job is very straightforward: maximize employment, stabilize prices and maintain financial stability,” Goolsbee said in an interview on CNBC.

“We’re forward looking about it, and so if the conditions collectively start coming in that on the through-line there’s deterioration on any of those parts, we’re going to fix it,” he said before the market opened Monday.

“There’s no bad weather. There’s only bad clothing. The conditions come in, we’re going to respond as appropriate,” Goolsbee added.

Friday’s weak jobs report sparked a selloff on Wall Street. July’s employment snapshot raised concerns that the Fed may have made missteps amid its fight against inflation, ignoring cracks in the labor market.

“The Fed’s job is not to react backward-looking to one month’s numbers,” Goolsbee said about the jobs report, adding: “You can see that it’s the market’s job to react, and it’s the Fed’s job to act. And one of those moves with a lot more volatility than the other.”

The Marriner S. Eccles Federal Reserve Board Building is seen on September 19, 2022 in Washington, DC. 

The government’s latest batch of labor data for July sparked fears that the US job market might be deteriorating, dealing a blow to the Federal Reserve’s chances of taming inflation without a recession.

But, at the moment, it’s too soon to tell whether or not the central bank has succeeded in its historic war on inflation.

The Fed has always had an extremely tough job on its hands. It is very rare for the broader economy to remain intact after the central bank jacks up interest rates aggressively to rein in price pressures.

That outcome is known as a soft landing, and it has notably happened just once, during the 1990s. But the Fed has seen some remarkable progress since beginning to lift rates more than two years ago. In summer 2022, inflation was running at a 9.1% annual rate, a four-decade high. It’s now down to 2.5%, according to the Fed’s favorite inflation measure, much closer to the official 2% target.

Now, the Fed is in the final stretch of its inflation fight, and some economists have argued this could be the toughest phase yet.

Unlike a soft landing, a so-called hard landing is when the Fed does succeed in tamping down inflation, but unemployment rises steadily into recession territory. This happens because high interest rates function by deliberately cooling down the economy; it becomes more expensive to borrow and it gets a lot tougher to access credit, so people adjust their spending accordingly.

A crash landing would be an intensified version of a hard landing, in which inflation comes under control, but unemployment rises sharply.

Another unfavorable outcome for the Fed is a no landing scenario in which inflation gets stuck and doesn’t reach the central bank’s target, while the broader economy holds steady with interest rates perched at elevated levels.

There are no doubts that the Federal Reserve will be cutting rates at its September meeting — that’s if it doesn’t do so in an emergency meeting before then.

But now the question is: How big will that cut be?

Prior to Friday’s disappointing jobs report, investors were betting the Fed would opt for a traditional quarter-point move. But now the growing belief is that the Fed will cut by at least half a point, with some investors under the impression the Fed could cut by three-quarters of a point. That would mark the first time the central bank cut by that much since March 2020. Before then, the last time was December 2008.

To a certain extent, though, it won’t matter in the immediate term what size cut Fed officials settle on because it can take roughly a year for any interest rate moves to be felt throughout the economy.

On the other hand, US Treasury yields are already sliding a lot in anticipation of a big rate cut. Since they serve as a bellwether for the interest rates Americans pay on a range of loans, the dip can help ease the financial burden facing borrowers currently.

A trader works on the floor of the New York Stock Exchange on Friday August 2.

US stocks plunged on Monday morning as Friday’s dismal July jobs report continued stoking fears that the US economy is on shaky legs.

The Dow plunged 1,072 points, or 2.7%. The S&P 500 fell 4.1% and the Nasdaq Composite sank by a whopping 6.3%.

The Cboe Volatility Index, or VIX, which measures bets on expected stock market volatility, surged to 55. The last time the fear gauge hit that level outside of the pandemic was the Great Financial Crisis, in 2008.

That comes after the Dow on Friday dropped more than 900 points at its session lows.

Japanese stocks suffered their biggest daily loss since 1987 on Monday as fears about a US economic slowdown sent shock waves through global markets.

Up until Friday, many economists and investors felt a so-called “soft landing,” which occurs when inflation manages to cool off without a major rise in the unemployment rate, was in reach. Pulling that off is extremely rare.

But those hopes are quickly fading after July’s jobs report put the US unemployment rate at 4.3%, nearly a percentage point higher than where it was at the start of this year.

Now the consensus is a hard landing could be playing out, with inflation cooling at the expense of a slowing economy.

But fears are also mounting that perhaps it’s even worse than that and the economy is heading for a crash landing, resembling something like the beginning of the pandemic when everything took a turn for the worse suddenly.

Traders work on the floor of the New York Stock Exchange during afternoon trading on August 2.

The stock market could do something today that it hasn’t done since the pandemic: It could halt all trading.

Monday’s selloff could trigger what’s known as a circuit breaker.

The New York Stock Exchange uses a measure known as a circuit breaker tied to the S&P 500 to automatically halt trading and prevent panic selling or buying. This system was put into place after Black Monday, the market crash of 1987 when the Dow fell by more than 22% in one day.

Market-wide circuit breakers are triggered if the index falls by a significant amount when compared to the prior close.

At Level 1, trading across the entire exchange is halted for 15 minutes if the index drops by 7%. The S&P 500 would have to reach a level of roughly 4972.3.

Level 2 comes when the index drops by 13%. In that instance, trading halts for an additional 15 minutes. The S&P 500 would have to reach about 4651.51.

If the index declines by as much as 20%, trading closes for the remainder of the day. The benchmark index would have to tumble to roughly 4277.25.

People walk past the New York Stock Exchange on July 24.

The Dow was set to open 1,300 points lower, and the broader market is on pace to plunge 4.5% Monday. The Nasdaq, full of risky tech stocks, was on pace to drop an alarming 6%.

And all of that comes amid a global market meltdown. Japan’s Nikkei 225 index nosedived 12% — its worst rout in history.

A number of factors are sending markets into a tailspin, but the most prominent is fear that the US economy is in much worse shape than previously believed — evidenced by Friday’s unexpected jump in the unemployment rate.

The stock market had hit record after record this year, buoyed by falling inflation and the growing sense that the Fed would shift to rate cuts, which can boost corporate profits. Stocks had also been flying high because of big bets on tech companies involved in artificial intelligence: Many hoped that AI would create another global industrial revolution.

But the Fed didn’t cut rates as many had hoped last week. Friday’s jobs report was significantly weaker than expected. And AI profits are basically nonexistent, and the unproven technology isn’t yet ready for prime time — and some fear it’ll never get there.

So, investors are running for the hills. They’re selling off oil, crypto and especially tech stocks. Instead, they’re pouring into safe havens like bonds, sending Treasury yields lower.

The only question now: How long will this fear last before investors sense a buying opportunity?

Federal Reserve Chairman Jerome Powell takes a question from a reporter during a news conference following a Federal Open Market Committee meeting at the William McChesney Martin Jr. Federal Reserve Board Building on July 31 in Washington, DC.

The Federal Reserve screwed up by failing to cut rates last week. That’s the growing consensus on Wall Street. To make up for it, the market is pricing in an emergency rate cut — an extraordinary intervention that, as the name implies, the Fed rarely uses.

In recent central banking history, the Fed has introduced an emergency rate cut just four times.

The most recent cuts came during the Covid pandemic, when the global economy started to contract due to the outbreak of the coronavirus. Fed Chair Jerome Powell slashed rates by half a point on March 3, then by a full point on March 16, 2020, bringing the level all the way to zero.

Before that, the central bank slashed rates in December 2008 to manage the fallout from the Great Financial Crisis.

Prior to those cuts, the central bank made a similar move in 2001, after the 9/11 terrorist attacks.

Traders work on the floor of the New York Stock Exchange during afternoon trading on August 2.

The US stock market is set for an absolute rout Monday, with futures pointing to an ugly open: The Dow is set to open 1,000 points lower.

Futures give an indication of where stocks will head at the open, but market sentiment can shift on a dime. Still, if the Dow closes down 1,000 points, it will mark just the 15th time in the index’s 128-year history that has happened.

Of course, the Dow is trading around 40,000 points today, so this (so far) isn’t close to the worst day in market history — not yet, anyway.

The Dow’s worst drop in history, measured by points, came in the early days of the pandemic: It fell 2,997 points on March 16, 2020, a decline of 12.9%. The broader S&P 500 fell 12% that day — the second-worst decline in history.

But that wasn’t even close to “Black Monday,” the worst US stock market crash ever. The Dow on October 19, 1987, fell 22.6% in a single session. That day, the S&P 500 nosedived 20.3%.

People cross a street in front the headquarters building of the European Central Bank in Frankfurt am Main, western Germany, on June 5.

Inflation across the globe has started to recede. That has encouraged central banks to begin to trim their interest rates, which have been at decades-high levels for the past two years.

The Bank of Canada has already slashed rates twice. Central banks in Switzerland and Sweden also cut interest rates this year. The European Central Bank cut its benchmark rate in June. The Bank of England made its first move last week.

Yet the Federal Reserve is still holding out.

Fed Chair Jerome Powell has been lauded for his methodical approach and insistence on reviewing “the totality of the data” before moving forward with any rate cut in an attempt not to damage (or speed up) the US economy while bringing down inflation.

But that patience could now back fire. Monday’s market action has increased traders’ betting that the US central bank will be coerced into an emergency rate cut before its next scheduled monetary policy meeting, on September 17-18.

A "Now Hiring" sign is seen at a FedEx location on Broadway on June 7 in New York City. 

Friday’s jobs report isn’t the only thing spooking investors.

“The cacophony of earnings disappointments and weak corporate outlooks, global unrest, and currency gyrations” are just the latest flash points, said Greg McBride, chief financial analyst at Bankrate. “You have the recipe for sudden volatility,” he wrote in a note to clients Monday morning.

However, the July jobs data was “an inflection point for stocks,” said James Demmert, chief investment officer at Main Street Research. “After two years of elevated interest rates, we are finally starting to see the Fed’s efforts to reduce economic enthusiasm and inflation make its way to the labor market, and the slowdown in hiring is the surest sign yet that the days of high interest rates are numbered.”

Warren Buffett, CEO of Berkshire Hathaway, attends the 2019 annual shareholders meeting in Omaha, Nebraska, May 3, 2019.

Warren Buffett, the famed investor and CEO of Berkshire Hathaway, is running away from stocks when everyone else is heading for the exits. That’s unusual, and it’s making traders nervous.

Buffett is notorious for calm when everyone else is scared. He has said repeatedly that bear markets (when stocks are down 20% from their peak) are the best times to buy.

We’re not in a bear market in the US (not yet, anyway), but investors have been selling off tech stocks for weeks. The tech-heavy Nasdaq entered correction (down 10% from its peak) on Friday.

So when Buffett announced Friday that Berkshire had sold off half of its Apple stock, that started a new wave of panic on Wall Street. The Nasdaq is set to open an alarming 4.7% lower Monday.

“Buffett usually says bear markets are times to buy, not times to sell,” noted Wharton professor emeritus of finance Jeremy Siegel on CNBC Monday morning. “He’s saying this isn’t time to move in? That’s troublesome.”

The CBOE’s VIX volatility index shot up Monday morning to reach 50, a four-year high.

The last time the fear gauge hit that level outside of the pandemic was the Great Financial Crisis, in 2008.

The gauge, which is tied to the S&P 500, reflects how investors are spooked by the recent slew of data indicating a rapid slowdown in the US economy.

The Marriner S. Eccles Federal Reserve building is seen as renovations are conducted in Washington, DC, on May 24, 2023. 

The Federal Reserve declined an opportunity to cut rates at the conclusion of its policy meeting Wednesday. Now Wall Street almost universally believes that the Fed screwed up.

The Fed’s next meeting will be held in six weeks. But traders and some economists believe the central bank can’t wait that long.

“It’s so far behind the curve right now. I mean the Fed is up in the bleachers,” said famed Wharton professor emeritus of finance Jeremy Siegel on CNBC Monday morning. “You take a look at the data; it’s not at all comforting.”

Siegel said the Fed should cut rates before its meeting by a half-point. And the market increasingly agrees. CME’s FedWatch tool says the market has completely priced in a half-point cut by the Fed’s next meeting — and a 75% chance that the Fed will cut by a half point this week.

That would be an extraordinary intervention. The last time the Fed cut rates in an emergency was the early days of the pandemic, when it slashed rates all the way to zero.

Economic data has been worse than expected, particularly the unexpected rise in the unemployment rate to 4.3%. But it’s not dreadful. However, the Fed’s rate decisions don’t take hold in the economy right away, so timing is notoriously difficult.

The Fed is trying to avoid a so-called hard landing in which it hikes rates (they’re at a 23-year high at the moment) to gain control of inflation, but the economy slows down so much it enters a recession. That’s not where the economy is right now, but economists and investors are increasingly concerned that the US economy could go into a recession.

Siegel on CNBC said the Fed is 90% of the way to its 2% inflation target (its preferred inflation metric is now at 2.5%), so it’s time for the Fed to start cutting.

Some prominent economists said the Federal Reserve should have lowered rates at its July monetary policy meeting last week.

Former Fed Vice Chair Alan Blinder and Nobel prize-winner Paul Krugman said America’s central bank shrugged off calls to slash its benchmark lending rate.

Now, analysts at Citigroup and JPMorgan are expecting the Fed to end up cutting rates by half a point in both September and November to make up for some lost ground.

Generally, the Fed makes its decision congruent with what’s going on with inflation or the job market. In summer 2022, when inflation was running at 40-year highs, the Fed was hiking by three-quarters of a point, and during the Great Recession, the Fed cut rates by three-quarters of a point at several meetings.

U.S. Federal Reserve Chair Jerome Powell speaks during a press conference following a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington on July 31.

The one silver lining from Monday’s market action is that it likely cements the first interest rate cut in September.

It also raises the odds that the Federal Reserve could roll out an even bigger rate cut than anticipated. That would usher in lower borrowing costs on everything from mortgages and car loans to credit cards.

The Fed’s latest policy statement, released at the conclusion of its July policy meeting last week, said the central bank is now wary of any risks to the US job market, and suggested that inflation has become less of a concern in recent months. The Fed is now attentive to both sides of its so-called dual mandate of stabilizing prices and maximizing employment.

There is one more jobs report before the Fed’s September 17-18 meeting, and if unemployment rises even higher, the central bank may need to cut more aggressively.

Friday’s dismal jobs report triggered a well-known recession indicator developed by American economist Claudia Sahm, who worked at the Fed for more than a decade.

The “Sahm rule” posits that whenever the unemployment rate as a three-month average rises 0.5 percentage points from the lowest point in the past 12 months, that means the economy is in the early signs of a recession.

Since January, it has risen by 0.6 percentage points.

But some economists say lingering effects from the Covid-19 pandemic have rendered many rules useless.

“I’m very hesitant to use the ‘R’ word (recession), because I don’t think we’re there; but this is something to keep our eye on,” Elizabeth Crofoot, senior economist at labor analytics firm Lightcast, told CNN after the release of the July jobs data.

A trio of traders work on the floor of the New York Stock Exchange, on Friday, Aug. 2.

The US stock market looks like it’s going to have another very rough day on Monday. But this is not what a market crash looks like.

US futures, which give investors a sense of how the market will open at 9:30 am ET, are sharply lower. Dow futures are down 800 points, or 2%. Futures for the broader S&P 500 are 2.9% lower. And futures for the tech-heavy Nasdaq, which entered correction territory (a 10% decline from the peak) fell 4.2%.

That’s bad, but it’s not close to historically bad. By comparison, Japan’s Nikkei 225 plummeted 12% Monday — that’s a crash.

The Dow’s worst drop, measured by points, in history, came in the early days of the pandemic: It fell 2,997 points on March 16, 2020, a decline of 12.9%. The broader S&P 500 fell 12% that day — the second-worst decline in history.

But that wasn’t even close to “Black Monday,” the worst US stock market crash ever. The Dow on October 19, 1987, fell 22.6% in a single session. That day, the S&P 500 nosedived 20.3%.

The US trading day hasn’t even begun, and strange things can happen when fear takes hold on Wall Street. But — at least so far — this is not what a market crash looks like.

Investors are concerned that the US economy may be slowing down faster than they expected. So they’re getting out of risky bets — and that’s particularly true for one of the riskiest markets: cryptocurrencies.

Bitcoin tumbled 15% Monday to $51,600. That’s bitcoin’s lowest level since late February. The world’s most popular cryptocurrency is still up about 17% this year, despite the pummeling it has taken in recent days.

Other cryptos fell sharply, including Ethereum (down 22%), BNB (down 19%) and Solana (down 18%).

Crypto has risen sharply this year and last, bouncing back from a disastrous 2022 crash. Investors had been more open to risk over the past couple years as the economy rebounded from the pandemic. Some investors had also viewed crypto as way of shielding their money from the impact of inflation.

But inflation has moderated in recent months, and sentiment has shifted. Now, investors are more concerned about the slowing job market, which could lead the Fed to cut rates. That could make other investments appear more attractive than crypto.

Trading on the market is inherently risky, so two emotions tend to dictate the direction of stocks, bond, currencies and commodities: fear and greed.

So CNN Business created a Fear & Greed Index, a measure of market sentiment, analyzing seven different metrics.

Today, the Fear & Greed Index is pointing solidly to “Fear” and remains just a couple points away from “Extreme Fear.” That’s a big change: Just a week ago, the market was in “Neutral.”

Investors are worried that the economy is taking a turn for the worse, confirmed by Friday’s weak US jobs report and rising unemployment rate. Investors are also fearful that tech stocks may have been driven too high this year on hopes that AI could create a new wave of profitable technologies — risky applications that customers may hold off on buying if the economy heads south.

The price of oil fell sharply along with stocks Monday as investors’ concerns about the global economy mounted.

US oil tumbled 1.9% to $72.10 a barrel Monday. Brent crude, the global benchmark, fell 1.5% to $74.60 a barrel.

Crude prices have been falling recently as fears grow that a recession could hurt demand for travel and other fuel needs. Although a recession in the US seems far off, America’s fast-rising unemployment rate is worrying investors.

Concerns about weak Chinese demand are also weighing on prices, and more than compensating for fears about rising tension in the Middle East.

Oil could hover around current eight-month lows for a while, despite those threats of a wider conflict in the Middle East, according to Tom Kloza, global head of energy analysis at Oil Price Information Service.

“Beginning with the Hamas action last October 7, we are seeing mostly apathy when it comes to fears about a wider regional war in the Middle East,” he said.

US stock futures were set to tumble Monday for the third straight session as investors fears that the US economy is weakening were confirmed by a worse-than-expected July jobs report on Friday in which America’s unemployment rate shot up to 4.3%.

Dow futures were down 600 points, or 1.5%. S&P 500 futures fell 2.7% and Nasdaq futures were 4.5% lower.

The tech-heavy Nasdaq in particular has gotten walloped recently as Wall Street begins to doubt the sky-high valuations investors have assigned to artificial intelligence technologies. Hope that AI would usher in a new era of surging profit has buoyed tech stocks, which have been largely responsible for the overall market hitting record after record this year.

Now, investors are running for the hills, as AI profits seem far in the distance — particularly if the economy takes a turn for the worse. Warren Buffett has dumped half Berkshire Hathaway’s stake in Apple.

Though a US recession seems far off, given America’s surprisingly robust second-quarter growth, the fast rise in the unemployment rate signals trouble ahead. So investors are fleeing to relative safety, selling off stocks in favor of bonds. The 10-year Treasury yield, which moves in opposite direction to prices, fell sharply to 3.74%. It was at 4% to start the month.

The volatility in Japan started last week, when the Bank of Japan raised interest rates for the second time this year and announced plans to taper its bond buying. Traders expect more rate hikes to come later this year as the central bank tries to contain inflation.

The Nikkei closed down 5.8% Friday, as traders fretted about the impact of a stronger yen on Japanese companies. A rising yen would hurt exporters and companies with overseas earnings.

A rapid appreciation in the Japanese currency has also forced many market participants to unwind the yen carry trade, a hugely popular trading strategy. With interest rates having been extremely low in Japan for decades, many investors have borrowed cash cheaply there before converting it to other currencies to invest in higher-yielding assets.

Last week, the yen surged nearly 5% against the greenback. On Monday, it strengthened further, up 3% to trade at 142 per US dollar.

The “beefier” yen triggered a global unwinding of carry trades, according to Stephen Innes, managing partner of SPI Asset Management.

From there, the market turmoil morphed into a “full-on avalanche,” propelled by the surprisingly hawkish turn from the BOJ, China’s economy slowing to a crawl and weak US tech earnings, he added.

The Stoxx Europe 600 index, the region’s benchmark, was 2.4% down in morning trade. It has fallen 6% in the past five days to lows last seen in February.

Mohit Kumar, an economist at Jefferies, said a big driver of recent market moves was previous enthusiastic buying. “US equities, particularly the tech sector, (were) overowned and some froth needed to be cleared,” he wrote in a note Monday.

Taiwan’s Taiex ended down 8.4%, its worst day ever, while South Korea’s Kospi finished 8.8% lower. Australia’s S&P/ASX 200 lost 3.7%. Hong Kong’s Hang Seng Index and China’s Shanghai Composite were down 2.3% and 1.3% respectively.

Japanese stocks suffered their biggest daily loss Monday as fears about a US economic slowdown sent shock waves through global markets.

The Nikkei 225 index of leading stocks in Tokyo lost a staggering 4,451 points, its biggest drop in history. The index closed more than 12% down, taking its losses since early July to 25% and entering bear market territory.

Fears of a sharp slowdown in the US economy have raised expectations that the Federal Reserve will have to slash interest rates. Coming as the Bank of Japan (BOJ) takes its interest rates higher to contain inflation, that is boosting the value of the yen against the US dollar and making Japanese export-dependent stocks less attractive.

At the same time, tech stocks are being hammered by a combination of mixed earnings and increasing skepticism among some investors about the hype around artificial intelligence.

“The biggest threat to market stability isn’t what the (currency) market does, but what US equities, particularly tech stocks, do. The rally was huge, the valuations were stretched and Warren Buffet’s liking for cash is making headlines again,” wrote Societe Generale strategist Kit Juckes in a note Monday.

Trading was halted for short periods of time in Japan and South Korea as circuit breakers designed to prevent panic selling were triggered multiple times.

“(Today) was relentless,” said Newman. “It was unusual because there was the absence of a rebound at the end of the day, which you would normally see due to short covering,” he added. That’s when traders buy back shares they have borrowed to sell.

The volatility spread to other markets in Asia and Europe, and US stock futures fell sharply overnight. Nasdaq futures were down 4%. Dow futures and S&P 500 futures were down 1.5% and 2.3% respectively.

Stocks tumbled Friday as a disappointing jobs report added to fears that the US economy is weakening.

The Dow closed 612 points, or 1.5%, lower, after falling more than 900 points earlier in the session. The S&P 500 lost 1.8% and the Nasdaq Composite declined 2.4%.

The Nasdaq closed in correction territory, or more than 10% off its most recent high on July 10.

CNN’s Fear & Greed Index, which measures seven barometers of market sentiment, fell to a “fear” reading of 27.

The US economy added just 114,000 jobs in July, according to Bureau of Labor Statistics data released Friday. That’s far below economists’ estimates of 175,000 jobs added. The unemployment rate surged to 4.3% from 4.1%, above expectations for it to stay steady.