It’s becoming abundantly clear that the jobs report from last Friday, which indicated that recession may be on the horizon, plus world events, have unsettled stock markets and trading abroad.

After the jobs report was released on Friday, the markets reacted. The end result was the Nasdaq beginning a “correction.”

The broad market index dropped 1.84% to end at 5,346.56. The Nasdaq Composite lost 2.43% to close at 16,776.16, bringing the decline for the tech-heavy index from its recent all-time high to more than 10%. The Dow Jones Industrial Average fell 610.71 points, or 1.51%, to finish at 39,737.26. At its session low, the 30-stock index was down 989 points.

The Nasdaq is the first of the three major benchmarks to enter correction territory, down more than 10% from its record high. The S&P 500 and Dow were 5.7% and 3.9% below their all-time highs, respectively.

Friday’s declines are a “natural course” in a bull market that is reverting after its steep uptrend, LPL Financial chief technical strategist Adam Turnquist said.

″[The Nasdaq] was very overbought coming into July, same thing with semiconductors. And a lot of that AI enthusiasm hasn’t really had a reality check at this stage,” he said, adding that “it’s not the end of the AI story.”

But it was more than just technology stocks that saw selling on Friday. Bank stocks were slammed on the recession fears with Bank of America off 4.9% and Wells Fargo down 6.4%.

Recession is definitely the looming boogeyman in the room, and the news that the Sahm Rule indicators were being triggered definitely upset the markets. And there were more heartburn moments to come. Governments around the world are currently telling their citizens to get out of Lebanon immediately, before an actual war breaks out between Hezbollah and Israel. Secretary of State Antony Blinken is apparently expecting Iran to do something – whether it be use Hezbollah to attack Israel, or attacking Israel directly – soon. The markets HATE war, because what the markets love is predictability. War is not predictable.

And while the actions of one man should never be a huge market indicator, it raised many eyebrows when Warren Buffett’s Berkshire Hathaway sold off almost 50% of their stock in Apple during the second quarter of the year, according to their earnings report that was released on Saturday. The markets also hate it when large companies with lots of money decide to sell off well-known stock.

So it shouldn’t be a surprise when the markets start to react badly in a collective domino effect. The question then becomes, just how badly will they react? So far… it’s not looking good.

BREAKING: Japan's Nikkei 225 index drops 10% in the worst single-day decline since 1987 as worries over the U.S. economy trigger sell-offs in world markets. https://t.co/7A403dFlz9

— The Associated Press (@AP) August 5, 2024

“Black Monday” was trending on X, and with good reason. Japan has officially entered “bear market” status.

The Nikkei 225 dropped 5.8% on Friday and it is headed for its worst two-day decline ever. Its worst single-day rout was a plunge of 3,836 points, or 14.9%, on a day dubbed “Black Monday” in October 1987. Share prices have fallen in Tokyo since the Bank of Japan raised its benchmark interest rate on Wednesday. The Nikkei is now down 4.3% from a year ago.

South Korea then followed suit.

Panic arrives: Korea suspends program selling

*S.KOREA HALTS SELL ORDERS FOR PROGRAM TRADING IN KOSPI MARKET

— zerohedge (@zerohedge) August 5, 2024

The cryptocurrency market also took a nose dive.

Led by a drop of 11% in bitcoin in the past 24 hours and a 21% plunge in ether, the overall value of cryptocurrencies sank by about $270 billion, according to CoinGecko data.

The selloff in the crypto market coincided with a broader slide in equities in Asia-Pacific markets. Japan’s Nikkei 225 dropped as much as 7%, extending losses that began last week, after the Bank of Japan announced it would hike its benchmark interest rate to the highest level in 16 years.

In the U.S. the Nasdaq slid 3.4% last week into correction territory, capping off the tech-heavy index’s worst three-week stretch since September 2022, when the market was in freefall. Amazon and Nvidia contributed to the declines.

In short, there is a whole lot of risk in the world right now, and the markets are reacting poorly. Which means that no one should look at their 401k status anytime soon. At the time this post is being written, Wall Street has not yet opened for business. But all indications indicate that things could get very ugly, very quickly.

U.S. stock futures fell Sunday night following a volatile week for Wall Street, in which the Nasdaq Composite dropped into correction territory.

Dow Jones Industrial Average futures fell by 383 points, or 0.96%. S&P 500 futures and Nasdaq-100 futures dipped 1.6% and 2.5%, respectively.

Wall Street is coming off a brutal week for the major averages. On Friday, the Nasdaq capped a third straight week of losses, bringing the tech-heavy index down more than 10% from a record set last month.

The S&P 500 also posted a third straight losing week, down 2% for the week. Even the Dow Jones Industrial Average, which had been outperforming, snapped a four-week win streak, falling 2%.

In Asia overnight, Japan stocks confirmed a bear market on Monday as Asia-Pacific markets continued the sell-off from last week, with the Nikkei 225 and Topix dropping over 12%. The benchmark indexes have fallen more than 20% from their all-time highs on July 11.

U.S. Treasury yields tumbled as well. The benchmark 10-year note on Friday yielded 3.79%, down from where it was one week previously at 4.20%.

Tomorrow is shaping up to be a sobering reminder that voters will evaluate the future president on more substantive grounds than vibes and showmanship.

— Noah Rothman (@NoahCRothman) August 5, 2024

The stock market isn’t the be-all, end-all of economic health, but it is a huge indicator of what the markets are predicting and what they are concerned about. And yes, a market correction will have a political impact. The 2008 “housing bubble” and subprime mortgage collapse definitely had an impact on the presidential election that year. Are we headed into the same situation? I desperately hope not, because the American public is still struggling with inflation and debt and high interest rates. But if something DOES happen, the blame will be laid at the feet of Joe Biden and Kamala Harris. The Harris campaign already tried to pin blame on Donald Trump for Friday’s jobs report. Biden and Harris have been in the White House too long for that to stick. Kamala may try to dodge responsibility the way she is currently dodging media interviews, but she owns this, too. If you attempt to take the credit, you also assume the blame. Kamala Harris has cast more tie-breaking votes than any other vice president due to the tight numbers in the Senate. That means she owns her own vote on things like the “Inflation Reduction Act.” Will the media push for answers from Kamala Harris if there is a market correction that causes stocks to drop?

A word of advice for Donald Trump – if the media approaches you with questions about the stock market, or the economy, your response should be this: “Have you asked the vice president this question yet? After all, she is currently part of the current administration in charge of making decisions.” And then stop. We all know Donald Trump loves going toe-to-toe with the media. He should embarrass them every chance he gets because they are too chicken to demand answers from Kamala Harris. And if the markets crash and we eventually do go into a recession, Kamala Harris will need to have some good explanations.

UPDATE 9 AM PDT
We all know that no reporter is going to even get to approach Joe Biden now to ask him to follow up on this one.

Joe Biden said last week that he “cured the economy” and not one media member will mention how wrong that was or even ask him or acting president Kamala Harris about it because it would make their political party look bad
pic.twitter.com/kd2bG7TWOO

— Ian Miller (@ianmSC) August 5, 2024

Yeah, it’s looking “cured,” all right.

The Dow Jones Industrial Average dropped by as much as 1092 points Monday morning and was hovering around a 2.5% drop by 10:43 am EST. The NASDAQ fell by as much as 4.1%, while the S&P 500 dropped by as much as 3.3%. The U.S. market collapse followed markets around the world, from Asia to Europe, with Japan’s Nikkei 225 dropping more than 12%.

“The market was whistling past the graveyard. I think people were basically lulled into a sense of security, yet the market itself was very vulnerable to correction — and the weaker than expected economic and employment data provided that catalyst for correction,” CFRA Research chief investment strategist Sam Stovall said.

Stocks in tech companies and artificial intelligence have seen some of the steepest drops. On the S&P 500, the tech industry was down by around 4%, while real estate was down more than 1%.

Both the S&P 500 and the NASDAQ Composite are reportedly on track for their worst August in more than two decades, according to Market Watch. Over the past three days, S&P has been down 6.4%, and NASDAQ has been down 8.58%. Both are tracking for the worst August since 2002.

The Wall Street Journal reported that Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla combined lost around $753 billion in market capitalization as of Monday morning.

JP Morgan analysts now predict a 50-50 chance of a recession, while Goldman Sachs believes there is a 25% chance of recession in the next year.

https://twitter.com/monsterhunter45/status/1820466927409742056
The “soft landing” is out the window. The only question is how prepared we are for a harder landing.

Featured image via geralt on Pixabay, cropped, Pixabay license