On Monday, Aug. 5, 2024, Wall Street experienced a dramatic plunge, reminiscent of the infamous stock market crash on Oct. 19, 1987. Dubbed “Black Monday,” the day saw the S&P 500 fall by 3%, the Nasdaq by 3.4%, and the Dow Jones drop by more than 1,000 points.
Following significant losses in Asian and European markets, the American stock market faced a severe correction. The Financial Times reported that Japan’s Nikkei index had its worst day in 37 years. By the end of the trading day, the VIX index, known as Wall Street’s “fear gauge,” was at 38, significantly higher than its recent levels but below the peak of 65 reached earlier in the day.
According to The Wall Street Journal, the sell-off was driven by several factors: disappointing U.S. employment numbers released Friday, hype surrounding artificial intelligence, a rate hike by the Bank of Japan, and Berkshire Hathaway’s announcement that it sold half of its Apple shares.
Financial analyst Antonio Cavarero described the market’s sudden shift as moving “from a hot summer day to autumn.” Tech stocks were particularly hard-hit, with Nvidia shares, heavily utilized in AI, dropping 6% at one point, peaking at a 15% decline.
The Wall Street Journal suggested that while Monday’s events echoed 1987’s “Black Monday,” the situation might be less severe. In 1987, markets rebounded without long-term economic impact. Conversely, the worst-case scenario would be a repeat of the 2008 financial crisis, though this seems unlikely. Banks today are less leveraged, and the system is less exposed to liquidity crises, with private lenders bearing more risk than in the past.
Andrew Brenner, a financial analyst, told The New York Times, “The markets are a bit out of control. It’s a real panic. It’s not real, but it’s painful and could last a few weeks.” Despite the turmoil, some macroeconomic indicators still point to an expanding economy, with ongoing hiring at a pace sufficient to absorb new labor market entrants.
Bloomberg highlighted the shock experienced by market veterans and raised the question of whether Monday marked the end of a global market downturn or the beginning of a prolonged crisis. “One thing is certain,” Bloomberg noted, “the pillars supporting market gains for years have been shaken.”
The Atlantic urged calm, reminding readers that a 10% correction in the S&P 500 occurs with a 64% probability each year. The recent highs in the stock market and the ongoing growth of the U.S. economy, coupled with decreasing inflation, provide some reassurance amidst the chaos.
Asian markets rebounded strongly on Tuesday morning, with Japan’s Nikkei index rising by 10% at the opening, and previously hard-hit tech stocks recovering, according to The Wall Street Journal.
As the global financial community watches closely, the coming weeks will be crucial in determining whether this “Black Monday” is a temporary setback or the precursor to a more severe economic downturn.
Written by Imane Moumen
