Traders work on the floor of the New York Stock Exchange on July 24, 2024.
Spencer Platt | Getty Images
Stocks sold off Thursday, with the Dow Jones Industrial Average heading for its worst day of the year.
The Dow dropped 512 points, or nearly 1.3%. At its session lows, the 30-stock index lost 744.22 points, or about 1.8%. The S&P 500 shed 1.3%, while the Nasdaq Composite slipped 2.2%. The Russell 2000 index, the small-cap benchmark that has rallied lately, dropped 3.6%.
Some fresh data stoked fears over a possible recession and the notion that the Federal Reserve could be too late to start cutting interest rates. Initial jobless claims rose the most since August 2023. And the ISM manufacturing index, a barometer of factory activity in the U.S., came in at 46.8%, worse than expected and a signal of economic contraction. After these releases, the 10-year Treasury yield dropped below 4% for the first time since February.
These weak data releases come a day after the Fed chose to keep rates at the highest levels in two decades, when Fed Chair Jerome Powell gave investors some hope by signaling a September rate cut is on the table.
“The data we have got since the Fed meeting signals all of a sudden that people are now worrying that maybe it isn’t a soft landing and the Fed has vacillated too long,” said Tom Fitzpatrick, managing director for global market insights at R.J. O’Brien and Associates. “The bond market is already telling you that we’re behind the curve…the Fed is more prepared to make a different mistake for fear of making a similar mistake.”
Chris Rupkey, chief economist at FWDBONDS, added that Thursday’s data hinted at an economic downturn amid the volatility.
“The stock market doesn’t know whether to laugh or cry because while three Fed rate cuts may be coming this year and 10-year bond yields are falling below 4.00%, the winds of recession are coming in hard,” Rupkey said.
Stocks that would suffer the most under a recession were among the biggest losers during the day’s trading session, including JPMorgan Chase, which lost 2%, and Boeing, which fell more than 5%.
Dow, 1-day
Stocks began the day on a high note, however, as Meta Platforms rallied more than 4% on stronger-than-expected second-quarter results and upbeat guidance. But Meta was one of the few stocks in the green as the trading day went on.
Even Big Tech stocks such as Nvidia were feeling the pain with the artificial intelligence chip leader off 8% as investors overall may be taking some chips off the table into what could be a more volatile time for the market with a November election around the corner. The S&P 500 is up 14% for the year still, coming off its eighth positive month in the last nine in July.