THE US MARKET SEES WORST SESSION SINCE 2022
Introduction:
The S&P 500 experienced its most significant decline in over a year on Monday, closing down 3% at 5,186.33. This marks the sharpest drop since September 2022 and the lowest close since May 6. The index saw only 22 of its constituents close higher, highlighting the breadth of the selloff. This downturn also marked the S&P 500’s third consecutive loss, reflecting heightened investor anxiety over a potential recession in the United States.
The selloff was mirrored across other major indices, with the Nasdaq Composite and the Dow Jones Industrial Average also logging their third straight day of losses. The Nasdaq Composite dropped 3.5%, while the Dow Jones fell by 1,000 points, or 2.6%. Meanwhile in Japan the 12.4% loss on the Nikkei was the worst day for the index since the “Black Monday” of 1987. The Nikkei erased all its gains this year, moving into a loss position. The yen also strengthened to its highest level against the dollar since January, and was last trading at 142.09.
Economic Concerns Fuel Market Turmoil
The catalyst for this widespread market decline was the July U.S. payrolls report released on Friday, which exacerbated fears of an impending recession. Investors are concerned that the Federal Reserve, having aggressively raised interest rates to 5.25% in 2022-2023, has yet to begin cutting rates, potentially stifling economic growth.
Here are some Major Losers and WinnersIn the S&P 500, some of the biggest decliners on Monday included:
- 1. Caesars (NASDAQ): -6.9%
- 2. Walgreens Boots (NASDAQ): -6.62%
- 3. Etsy (NASDAQ): -6.6%
- 4. Intel (NASDAQ): -6.4%
- 5. Nvidia (NASDAQ): -6.36%
On the other hand these stocks were positive during the crash
- 1. Kellanova (NYSE): +16.2%
- 2. Tyson Foods (NYSE): +2.1%
- 3. CrowdStrike (NASDAQ): +1.9%
- 4. Advanced Micro Devices (NASDAQ): +1.8%
- 5. Constellation Energy (NASDAQ): +1.7%
Global Impact and Recovery Hopes
The turmoil was not limited to U.S. markets. Japanese stocks suffered their biggest daily loss ever on Monday, with the Nikkei 225 index plummeting by 4,451 points, a 12% drop that pushed the index into bear market territory. This dramatic fall brought back memories of “Black Monday” in 1987, when global markets similarly crashed.
Despite the sharp declines, there were signs of a potential rebound. Futures contracts tied to the major U.S. stock averages pointed to a recovery on Tuesday, with S&P 500 futures up 1.5%, Nasdaq futures rising 1.8%, and Dow futures gaining 1%. Similarly, Japan’s Nikkei rebounded more than 11% for its best day since 2008.
The recent market crash has had a profound impact on investor sentiment, as evidenced by the Fear and Greed Index, which currently stands at 16, indicating “Extreme Fear.” This marks a significant shift from the “Neutral” sentiment observed a week and a month ago, and the “Greed” sentiment seen a year ago. The index, which measures emotions driving the market, suggests that fear is currently dominating investor behavior.
The index’s extreme fear reading reflects heightened anxiety among traders, who are likely responding to the poor U.S. jobs report and the subsequent market downturn. This fear can lead to increased volatility as investors may panic sell, further driving down stock prices. However, it can also present opportunities for bold investors who see potential for a rebound and are willing to buy at lower prices.
Investor Sentiment and Market Outlook
The selloff has sparked a mix of fear and opportunity among investors. Wall Street’s “fear gauge,” the CBOE Volatility Index, reached its highest level since the COVID-19 pandemic, indicating heightened market anxiety. However, some investors are optimistic, viewing the downturn as a buying opportunity. One social media user advised against panic selling, suggesting that the current situation could be a normal market correction influenced by wealthier investors.
As the market seeks to stabilize, attention will likely remain focused on economic indicators and the Federal Reserve’s policy decisions. Investors will be watching closely for signs that the economy can avoid a recession and that the Fed might ease its monetary policy to support growth.
It’s useful to look at stock market levels compared to where they’ve been over the past few months. When the S&P 500 is above its moving or rolling average of the prior 125 trading days, that’s a sign of positive momentum. But if the index is below this average, it shows investors are getting skittish. The Fear & Greed Index uses slowing momentum as a signal for Fear and a growing momentum for Greed.
The most well-known measure of market sentiment is the CBOE Volatility Index, or VIX. The VIX measures expected price fluctuations or volatility in the S&P 500 Index options over the next 30 days. The VIX often drops on days when the broader market rallies and soars when stocks plunge. But the key is to look at the VIX over time. It tends to be lower in bull markets and higher when the bears are in control. The Fear & Greed Index uses increasing market volatility as a signal for Fear.
Overall Market View
This is a great opportunity for traders and investors to dip their toes into life-changing profits. The last time such an opportunity arose was during the 2020 Covid-19 Crash, 4 years later and traders are presented with a golden opportunity to do it all over again. For those eager to come out on top during the crash: JOIN US – the Forex Frontier community can be the gateway to informed, strategic trading in this dynamic market. You can do so in our Discord Group – https://discord.gg/4FjgcsYSrh
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