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The stock market is on track to gap-open sharply lower on Monday as negative sentiment seen in the final two sessions of last week has carried over into the new week. The index futures were all sharply lower, with the Nasdaq 100 down over 4% and volatility has spiked, with the CBOE Volatility Index, aka VIX, up over 100%. Asset classes plunged across the board amid worries over a hard landing in the U.S., which in turn may have a cyclical effect on the rest of the global economies as well.
Billionaire investor Warren Buffett’s Berkshire Hathaway, Inc. (BRK-A) (BRK-B) disclosed that it trimmed its equity portfolio considerably, and instead chose to accumulate cash. This could potentially trigger fears among traders regarding the near-term outlook for the market. His firm sold nearly half of the Apple, Inc. (NASDAQ:AAPL) shares it held in its portfolio. A duo of service sector activity readings may also be in the spotlight.
| Futures | Performance (+/-) |
| Nasdaq 100 | -4.37% |
| S&P 500 | -2.88% |
| Dow | -1.90% |
| R2K | -4.06% |
Cues From Last Session:
Earnings and economic catalysts were the dynamics in play in the market in the week ended Aug. 2, with all three major averages plunging sharply for the week. The tech-heavy Nasdaq Composite turned in the worst performance, with the mega-cap sell-off weighing on the index.
After showing apprehensions early in the week, stocks rose sharply on Wednesday, encouraged by Advanced Micro Devices, Inc.’s (NASDAQ:AMD) positive earnings and the Federal Reserve’s insinuation of a rate cut in September through the tweaks in the post-meeting policy statement.
Selling set in on Thursday amid the release of weak manufacturing data and the jobless claims report that showed a spike in the number of individuals claiming unemployment benefits. The selling intensified on Friday amid disappointing tech earnings and worries about the health of the economy.
The Nasdaq Composite and the S&P 500 settled at their lowest in about two months, while the Dow slid to a one-month low. Small-caps, which were staging a nice recovery amid expectations of a Fed rate cut, pulled back sharply amid the deterioration in investor sentiment.
| Index | Week’s Performance (+/-) | Value |
| Nasdaq Composite | -3.35% | 16,776.16 |
| S&P 500 Index | -2.06% | 5,346.56 |
| Dow Industrials | -2.10% | 39,737.26 |
| Russell 2000 | -6.67% | 2,109.31 |
Insights From Analysts:
Weighing in on the premarket slump, CNBC Mad Money host Jim Cramer said investors may have been driven to the wall as they see the prospect of the Tokyo collapse of the 1980s recurring and were reacting to the fear. He also questioned whether SoftBank Group Corp. (OTC:SFTBY) was controlling the sentiment toward the Nasdaq stocks with its desperate selling. Softbank’s Tokyo-listed shares fell over 18%.
“Global reset led from Japan,” he said.
Cramer also recommended investors exercise restraint. “I do not want to call it over-exaggerated, but it would be more thoughtful if the decline were based on more basics and less emotion,” he said.
Wedbush’s Daniel Ives said in a post on X that Japan’s Nikkei 225 average’s historical sell-off as “Yen carry trade unwinds in brutal fashion and global economic/geopolitical jitters will cause a nasty day for US markets and tech stocks.”
“We keep same tech playbook we used during March 2020 Covid sell-offs and other macro panic events last few years,” he added.
Upcoming Economic Data:
The unfolding week’s economic calendar is fairly light and noteworthy among them are two separate service sector activity readings and the weekly jobless claims data.
See Also: How To Trade Futures
Stocks In Focus:
Commodities, Bonds And Global Equity Markets:
Crude oil futures fell sharply and even safe-haven gold futures declined, while the 10-year benchmark Treasury note yield slipped further below 4%, as it was at 3.739%, down 5.5 percentage points. Bitcoin USD (CRYPTO: BTC) plummeted over 15% toward the $51K mark.
Global equity markets sold off, with Japan setting in motion the selling wave, as the yen strengthened following the Bank of Japan’s recent tightening. This triggered the unwinding of yen carry traders, which in turn weighed down on stocks in the other regions.
Japan's Nikkei 225 average plunged 12.40% amid the mayhem on Monday before settling at 31,458.42. This came on top of the 5.8% plunge on Friday. Intraday, the index slumped 13.4%, marking the biggest single-day drop since a nearly 15% plunge in Oct. 1987 on the day dubbed "Black Monday."
South Korea's Kospi had to be halted amid a plunge and ended Monday's session down 8.77% at 2,441.55.
European stocks have started notably lower.
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