Robinhood and Nvidia lead market plunge amid economic jitters

The S&P 500 fell 3%, its biggest daily drop since September 2022, and the tech-heavy Nasdaq 100 fell by the same amount. Both benchmarks pared losses from earlier in the session after a stronger-than-expected services sector report eased concerns about the economy.

Meanwhile, the VIX index of stock market volatility rose, at one point hitting its highest level since early 2020. Today’s turmoil extends last week’s losses, after a weak U.S. jobs report raised concerns that the Federal Reserve is not moving fast enough to prevent a sharp economic slowdown.

“There’s a lot of people who were leaning into excessive risk and short-term volatility, and now the game is off,” said Matthew Rowe, head of cross-asset strategies at Nomura Capital Management. “There’s still a lot of uncertainty ahead on a lot of levels: monetary policy, geopolitics, the outcome of the election. And stocks are coming from a point where valuations have been historically very high.”

Tech giants bore the brunt of the losses, with the Bloomberg Magnificent 7 Index at one point falling to its lowest level since 2015 amid a crushing rout for names including Nvidia Corp. and Apple Inc., both of which pared losses on the day.

Concerns about the health of the U.S. economy came to the fore after data released Friday showed unemployment levels rose in July, signaling a closely watched recession. Indicator.

“With liquidity low in the summer, a strong trend that needs unwinding and the volatility index skyrocketing, this sell-off could last for a few days,” said Florian Eilbo, head of macro research at Lombard Odier Asset Management. However, “the macro picture itself is not as bad as the market seems to be.”

News that Warren Buffett’s Berkshire Hathaway sectioned Its stake in Apple Inc. surged by nearly 50% in the second quarter also drove risk-off sentiment across the tech sector. The slow monetization of AI tools — a long-standing concern among tech investors — remains, with Apple’s Intelligence IPO failing to live up to expectations.

The AI ​​supply chain has taken another hit amid… Reports Nvidia’s long-awaited Blackwell chips are expected to be delayed due to design flaws. The chips could be delayed by three months or more, which could impact major tech companies from Meta to Microsoft, The Information reported.

“When sentiment starts to deteriorate, the declines become more extreme than they should be,” said Ben Barringer, an analyst at Quilter Cheviot, adding that the next few weeks are likely to be volatile for tech stocks.

Market turmoil in Japan — where the central bank has begun raising interest rates while the Fed looks to cut them — is also affecting global markets across asset classes. Investors are moving to reverse course. Transport dealsJapan’s Topix index has fallen 24% from a record high last month, and the yen has strengthened.

“With yen carry trades now being rapidly liquidated, not only has the Japanese currency broken its downward trend significantly against all major currencies, but the risk assets that these trades were funded with are also being sold off,” Amir Anvarzadeh, a strategist at Asymmetric Advisors, wrote in a note to clients.

Sectors to watch

• Shares of Apple Inc. suppliers fell after Berkshire Hathaway Inc. nearly halved its stake in the iPhone maker. The drop came amid a broader market sell-off on Monday. Shares of Taipei-listed iPhone assembler Hon Hai Precision Industry Co. and chipmaker Taiwan Semiconductor Manufacturing Co. fell.
• America’s biggest companies fell, with Nvidia and Apple leading the Group of Seven lower amid a broader rout.
• Cryptocurrency-related stocks have been falling as bitcoin fell 13% last week, its worst since the FTX exchange collapse.
• Canned food stocks were in focus after reports that Mars is considering acquiring Kelanova. TD Cowen analyst Robert Mosco wrote that a merger of the two companies “could herald another round of consolidation in the canned food space similar to the 1999-2001 period, boosting valuations.”

Market Overview

• The S&P 500 fell 3%.
• The Dow Jones Industrial Average fell 2.6%.
• The Nasdaq Composite Index fell 3.4%.
• The Nasdaq 100 fell 3%.
• The Russell 2000 Index fell 3.3%.
• The yield on the 10-year US Treasury note fell 1.7 basis points.
• The Cboe Volatility Index rose 13.80 points.
• The Bloomberg Dollar Index fell 0.3%.
• West Texas Intermediate crude rose 0.3% to $74 a barrel.
• Euro rises 0.4%

Here are the most prominent transportation companies

• Nvidia shares fell 6% after a report suggested the company’s upcoming artificial intelligence chips will be delayed due to design flaws.
• Apple Inc. shares fell 4.8% after Berkshire Hathaway Inc. said Saturday it had cut its stake in the company by about 50% as part of a massive second-quarter selloff.
• Robinhood shares fell 8.2% as bitcoin lost about a fifth of its value amid a global sell-off.
• Kellanova shares rose 16% after Reuters reported that Mars is considering acquiring the snack maker, citing people familiar with the matter.
• Tyson shares rose 2.1% after the company reported third-quarter adjusted earnings per share that topped analysts’ average estimates.

Seller Notes

• Moderna shares fell 3.3% after being downgraded from outperform to sector perform by RBC Capital Markets, with the analyst noting that the downgrade reflects an “increasingly uncertain outlook.”
• Lockheed Martin Corp. shares closed little changed after RBC Capital Markets upgraded the defense contractor to outperform from the sector, the brokerage said, reflecting “improved revenue outlook.”
• Vertex Pharmaceuticals was downgraded to “equal weight” from “overweight” at Barclays, with analyst Gina Wang citing the rating. Shares fell 3.6%.
• Five9 shares fell 1.5% amid a broad sell-off even after receiving a double upgrade to buy from underperform at Bank of America, removing analysts’ only negative rating for the software company.
• Shares of Infinera fell 2% after Rosenblatt Securities downgraded the digital optical communications equipment maker to neutral from buy.
• Shares of Academy Sports & Outdoors Inc. fell after JPMorgan downgraded it from overweight to neutral.
• Mobileye Global shares fell 4.9% after Daiwa Securities downgraded the auto supplier to neutral from buy.

Related Market News

• Stock Valuation: Just as stock markets began to celebrate signals from the US Federal Reserve about cutting interest rates for the first time, they were hit by a perfect storm: surprisingly weak economic data that revived recession fears, disappointing corporate earnings, and weak seasonal trends.
• European stocks: European stocks The US dollar index fell, extending last week’s decline amid a deepening global rout in stock markets and a shift away from technology stocks that have powered this year’s rally.
• In Asia: Most Asian currencies rose against the dollar, supported by rising dovish bets on the Federal Reserve and lower Treasury yields. The ringgit outperformed amid improving momentum in foreign bond flows.

This story was produced with the help of Bloomberg Automation.

CEO Daily provides essential context to the news leaders need to know from across the business world. Every weekday morning, more than 125,000 readers trust CEO Daily for insights on and from top executives. Subscribe now.