NEW YORK (AP) – Markets on Wall Street and around the world are very nervous. Worried about the U.S. recession, investors sent the stock market in Japan to its worst day in decades and slashed billions in market value from some of the companies. the greatest technology in the world. They have turned into a relatively quiet year in the markets at its head.
For most of the year, investors around the world lifted stock markets, convinced that central banks had succeeded, if they stopped, in getting inflation under control, and were encouraged by the healthy economy of US and the promise of artificial intelligence.
In June Nvidia, the leader in AI chipmaking, had joined Apple and Microsoft as $ 3 trillion companies. By mid-July, the S&P 500, the Nasdaq composite and Japan’s Nikkei 225 were all up. Investors believed that the high interest rate set by the US Federal Reserve was easing inflation without causing a major slowdown in the US economy, the world’s largest.
That belief has gained momentum in the past few days. Investors are heeding warnings that Nvidia and other big tech stocks are too expensive, and that big investments in AI may not turn into profits for a while. Weak numbers in the labor market, manufacturing and construction last week raised concerns about the US recession and criticism that the Fed waited too long to cut rates. Meanwhile, the Bank of Japan has begun raising interest rates, causing chaos in Japanese markets.
On Friday, the Nasdaq composite was corrected, down 10% from recent highs. On Monday, the Nikkei fell more than 12%, the worst decline since 1987. In the afternoon in the US, the S & P 500 was down 2.2% and the Dow Jones Industrial Average down 2%. The prices of oil and other commodities fell due to the economic crisis.
US traders are betting the Federal Reserve will have to cut rates by half a percentage point in September instead of the usual quarter. Others want to reduce the emergency rate. However, there are dissenting voices who say that the sale is actually a good thing because the price of the property has gone up a lot.
Here’s a look at what’s causing the turmoil in the markets:
Inflation and central banks
Although the Fed hasn’t raised its benchmark rate in a year, interest rates remain at a two-decade high after the US central bank raised them 11 times starting in 2022 in order to bring inflation down to the 2% it wants. Part of the Fed’s goal was to cool the hot labor market that rose after the pandemic and the rest of the U.S. economy collapsed.
Investors thought the Fed and other central banks were on track, even though inflation was still above their targets. The European Central Bank and the Bank of England cut interest rates once, and the Fed has signaled it is ready to start cutting rates in September.
Worries about the US economy
There has been some weakness in the US economy, particularly spending by low-income Americans, but overall the economy is growing at a rate of 2.8% in the second quarter. Then came last week’s economic reports.
On Friday, the government’s monthly report on the labor market showed a sharp decline in hiring by US employers. Concerns that the Fed may keep the economy tight for too long are widespread in the markets. Reports on production and construction were also sparse.
Big Tech
While technology stocks have been the biggest winners in the market this year, members of the influential group of stocks known as the “Magnificent Seven” disappointed investors in their latest earnings reports. .
These few Big Tech stocks have driven the S&P 500 to record highs this year, in part because of the boom in artificial intelligence. But their performance took a turn for the worse last month as investors worried they thought their prices were too high and their profit expectations were too difficult to meet, especially about artificial intelligence.
Apple fell 5% Monday after Warren Buffett’s Berkshire Hathaway revealed it had reduced its ownership stake in the iPhone maker. Nvidia lost more than $238 billion in market value on Thursday and Friday and the stock was down another 7% on Monday.
The decline of Japan
The Nikkei posted its worst two-day decline, down 18.2% in the past two trading sessions. The wave of sales hit all kinds of companies, including Toyota, Honda and computer maker Tokyo Electron.
Share prices fell in Tokyo after the Bank of Japan raised its interest rate on Wednesday.
Analysts said another factor that contributed to the drop in share prices was the stock market. That when investors borrow money in a country with low interest rates and a relatively small amount of money, such as Japan, then they invest those funds in areas that will provide high returns. But higher interest rates, along with a strong Japanese yen, could force investors to sell stocks to pay off those debts.
The yen rose to 143.25 per US dollar on Wednesday morning. It was over 160 during the year.
#Financial #markets #world #falling #Heres