Concerns Over Recession Lead to U.S. Stock Market Plunge: Dow and S&P 500 See Largest Drop in Two Years

Fears of a recession in the United States have significantly impacted global stock markets

Fears of a recession in the United States have significantly impacted global stock markets. Following steep declines in major Asian and European markets, key indices on the New York Stock Exchange experienced their largest drops in two years. This plunge has been attributed to disappointing employment data and a selling spree centered on big tech stocks.

Recently, the Dow Jones Industrial Average fell by 1,033.99 points (-2.60%) to close at 38,703.27. The S&P 500 dropped by 160.23 points (-3.00%) to 5,186.33, while the tech-heavy Nasdaq Composite plummeted by 576.08 points (-3.43%) to 16,200.08. These represent the largest declines since September 2022.

July's employment report has heightened concerns about a rapid slowdown in the U.S. economy. The U.S. Department of Labor reported an increase of 114,000 non-farm jobs in July, with the unemployment rate rising to 4.3%. These figures, which fell significantly below average expectations, have exacerbated fears of a recession.

Big tech stocks were particularly hard hit. NVIDIA, a leading AI stock that has driven market strength this year, dropped by 6.4%. Apple also fell by 4.8% following news that Berkshire Hathaway, led by Warren Buffett, sold about half of its holdings in the company.

Asian markets also suffered significant losses. Japan's Nikkei 225 Average dropped by 12.4%, marking the largest decline since the "Black Monday" crash of 1987. The KOSPI similarly fell by 8.77% to close at 2,441.55. Analysts attribute the plunge in the Japanese stock market to the unwinding of "carry trades," driven by the Bank of Japan's tightening measures.

European markets were not spared either. The Euro Stoxx 600 index fell by 2.22% to 486.79 points, the German DAX decreased by 1.95% to 17,317.58, the French CAC 40 dropped by 1.61% to 7,134.78, and the UK's FTSE 100 declined by 2.04% to 8,008.23.

The "fear index," which indicates market sentiment, also surged to its highest level since the pandemic began. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX) rose by 15.18 points to 38.57, the highest since October 2020. Before the New York Stock Exchange opened, the VIX hit a high of 65.73, the highest level since March 2020.

This year, the New York Stock Exchange has been buoyed by the AI boom, but disappointing second-quarter earnings reports from big tech firms have put pressure on the market. The S&P 500 has fallen by about 8.5% from its peak, nearing correction territory, while the Nasdaq has already entered a correction phase, having dropped more than 10% from its recent high.

Sam Stovall, chief investment strategist at CFRA Research, commented, "While investors felt a sense of stability, the market was actually vulnerable to corrections. Disappointing economic and employment data acted as catalysts for this adjustment."

The recent plunge in the New York Stock Exchange underscores the uncertainty and anxiety surrounding the global economy. With growing fears of a recession, investors must adopt a more cautious approach. The volatility of the market is expected to increase, influenced by upcoming economic data and corporate earnings reports, making the responses of governments and central banks crucial.