On August 5th, the S&P 500 posted its worst day since 2022.
The Dow Jones Industrial average had dropped 2.6%, the Nasdaq dropped 3.43%, and the S&P 500 dropped 3%
These unprecedented numbers had come as a consequence of the US’s weak employment statistics for July. The official data reported a total of 114000 new jobs added, much lower than predicted. Moreover, unemployment reached a near 3-year high, at 4.3% Notably, Intel cut 15000 jobs, causing fear in the highly volatile, tech-centered Nasdaq.
Thus, panic ensued all across major stock markets, with Europe and Asia being the most heavily affected. The Japanese Nikkei 225 dropped 6%, its drop being the worst since Wall Street’s Black Monday in 1987 while the main European Stock Index STOXX 600 reported its steepest 3-day decline since June 2022.
These seemingly catastrophic hits on the economy caused many people to worry about an impending stock market crash. However, a senior investment strategy director at U.S. Bank Wealth Management assured that it is common for markets to occasionally drop 5-10% each year, and is a sign of a healthy market.
True to this observation, the US stock market quickly rebounded as more economic statistics were released for the US. The July reports for retail sales proved to be much stronger than expected, rising by 1% as opposed to the 3%. As a result of this good news, the stock market rebounded even stronger than the previous drop. The S&P 500 was up 9% since the low of August 5th, the Nasdaq up 11%, and the Dow up more than 5%
Fluctuations in the American economy can greatly impact the behavior of other international markets. Though it currently seems secure and is growing firmly, its growth is not without concerns. Though investors are not panicked, they are still concerned about current market behaviors that may affect its growth. Economists at Goldman Sachs predicted the odds of recession coming in the next 12 months as 1 in 4. Some major concerns lay in the tech industry; specifically AI, whose revenues do not justify their costs. So, many investors have started leaving tech socks, and investing in the much safer bonds.
This may cause changes to the strength of certain stock markets. It is crucial to remember that the economy is constantly changing and its growth will not continue to be linear but continue to have fluctuations such as the one seen earlier this August.
Written by Vi Lam Dinh
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