Nasdaq, S&P 500 Plunge Over 3% Amid Recession Fears and Apple Stock Decline

The Nasdaq and S&P 500 closed down over 3% on August 5, driven by escalating U.S. recession fears and a sharp decline in Apple shares following a significant investor's sell-off.

Nasdaq and S&P 500 Plunge Over 3% Amid Recession Fears and Significant Drop in Apple Shares

The Nasdaq and S&P 500 closed with at least 3% losses on August 5. The market extended the sell-off from last week amid concerns about a potential recession in the United States. Additionally, Apple shares experienced a significant decline following news that a substantial investor has reduced its position.

The Nasdaq and S&P 500 closed at their lowest levels since early May, and all three main indexes experienced their most significant three-day percentage declines since June 2022.

Last week's weak economic data, including the August 2 aft U.S. payrolls report, caused investors to flee risky assets, and recession concerns rattled global markets.

Investors are concerned that the economy is losing momentum faster than anticipated and that the Federal Reserve made a mistake by maintaining interest rates at its most recent policy meeting.

Apple's shares declined 4.8% following Berkshire Hathaway's decision to reduce its ownership of the iPhone manufacturer by half. Warren Buffett, a billionaire investor, also permitted Berkshire to accumulate $277 billion in currency.

The Cboe Volatility index, Wall Street's "fear gauge," reached its highest close since October 28, 2020, while Nvidia, Microsoft, and Alphabet also experienced a decline. Technology was the primary driver of declines in all 11 sectors of the S&P 500.

Austan Goolsbee, the President of the Chicago Fed, downplayed recession concerns. However, he emphasized that Fed officials must remain vigilant of environmental changes to avoid being overly restrictive with interest rates.

"Today we're seeing a sell-off as an extension of that anxiety that was felt last week," said Neville Javeri, portfolio manager and head of the Empiric LT Equity team at Allspring in Washington.

He said it "started off with the jobs data last week, and it clearly led to the belief that the Fed needs to start being more proactive around where those unemployment numbers are going."

Nasdaq and S&P 500 Plummet as Tech Stocks Lead Market Sell-Off Amid Economic Concerns

The Nasdaq Composite lost 576.08 points, or 3.43%, to 16,200.08, the S&P 500 lost 160.23 points, or 3%, to 5,186.33, and the Dow Jones Industrial Average fell 1,033.99 points, or 2.6%, to 38,703.27.

At its lowest point of the session, 5,119.26, the S&P 500 was down by over 4%.

July's U.S. services sector activity rebounded from a four-year low, as evidenced by increased orders and employment. Consequently, indexes reduced their losses.

Worries were exacerbated by the recent disappointing forecasts from the major U.S. technology companies, the weak employment report, and declining manufacturing activity in the world's largest economy. On August 2, the Nasdaq Composite verified that it was in correction territory.

According to Nikkei Asia, the CME Group's FedWatch Tool indicates that traders are currently pricing in an 86% likelihood that the Federal Reserve will reduce rates by 50 basis points at its upcoming policy meeting in September, as well as a 14% likelihood of a 25-basis point reduction.

The Magnificent Seven group of equities, which had previously driven the indexes to record highs this year, has been the primary focus of the sell-off.

Traders also attributed some stock weakness to the unwinding of sharp positions in carry trades, in which investors borrow money from economies with low interest rates, such as Japan or Switzerland, to finance their bets in high-yielding assets elsewhere.

After a Reuters report indicated that Mars, the candy behemoth, was considering a potential acquisition of Kellanova, the maker of Pringles, its stock rose by 16.2%.

The average volume for the entire session over the past 20 trading days was 12.29 billion shares, while the volume on U.S. exchanges was 16.50 billion.

On the NYSE, declining issues outnumbered advancing ones by 9.04 to 1. On Nasdaq, decliners were favored by a ratio of 6.44 to 1.

The Nasdaq Composite recorded 14 new highs and 508 new lows, while the S&P 500 posted 16 new 52-week highs and 26 new lows.