US stock index futures plummeted on Monday, with Nasdaq-linked futures dropping nearly 4%, as concerns about a potential recession in the United States spread through global markets. Stock markets across Asia and Europe experienced significant declines, and bond yields fell as investors sought safe-haven assets, anticipating that the US Federal Reserve would need to cut interest rates swiftly to stimulate growth.
All major tech and growth stocks, which were key drivers of the indexes reaching record highs earlier this year, fell sharply in premarket trading. Apple Inc (AAPL.O) saw a 7.3% decline after Berkshire Hathaway (BRKa.N) reduced its stake in the company by nearly 50%, indicating that billionaire investor Warren Buffett may be growing cautious about the overall US economy or stock market valuations.
Nvidia (NVDA.O) dropped 6.8% following reports of a delay in the launch of its new artificial intelligence chips due to design issues. At 4:33 a.m. ET, Dow e-minis were down 613 points, or 1.54%, S&P 500 e-minis were down 117.5 points, or 2.19%, and Nasdaq 100 e-minis were down 644.75 points, or 3.47%.
A disappointing jobs report and declining manufacturing activity in the world’s largest economy, along with bleak forecasts from major tech companies, pushed the Nasdaq 100 (.NDX) and Nasdaq Composite (.IXIC) into correction territory last week. The weak jobs data also triggered the “Sahm Rule,” considered a historically reliable recession indicator.
As a result, traders assigned a 91.5% probability that the US central bank will reduce benchmark rates by 50 basis points at its September meeting, with expectations for year-end rates at 4-4.25%, down from the current 5.25%-5.50%, according to CME’s FedWatch Tool. Additionally, major Wall Street brokerages have revised their projections for the Fed’s rate policy in 2024, indicating a greater likelihood of easing measures by the central bank.
