A swift global panic struck financial markets Monday, triggering stock sell-offs around the world amid fears that the U.S. economy is slowing into recession territory in the presidential election year.
Wall Street posted its second straight day of sharp losses after seven months of relatively steady growth. The technology-heavy Nasdaq composite fell 3.4%, the S&P 500 was down by 2.9% and the Dow Jones Industrial Average fell 1.9%.
Earlier Monday, Japan’s Nikkei 225 plunged 12.4% for its worst day since the 1987 crash. South Korea’s benchmark Kospi lost 8%. The losses cascaded through Europe, with London’s FTSE 100 down 2% on its worst day of trading since January.
Tech stocks in the U.S. sustained some of the heaviest losses as investors worried that spending on artificial intelligence might not bring results soon. Nvidia Inc. lost more than 6%, Apple was down 4.4% as Berkshire Hathaway cut its stake in the iPhone maker, and Microsoft fell 3.4%.
Investors worldwide reacted to the Labor Department’s report of weaker-than-expected hiring in July. They were concerned that the Federal Reserve had kept interest rates too high for too long to bring down inflation, which soared to a 40-year high under the Biden-Harris administration. The jobless rate in July rose to 4.3%, the highest since October 2021.
Economic anxieties highlighted by the massive sell-off rapidly regained prominence in the presidential campaign.
President Biden, returning to the White House from a weekend at his home in Delaware, didn’t respond to reporters’ shouted questions about the stock market. Vice President Kamala Harris, who quickly captured the Democratic Party nomination after Mr. Biden dropped out of the race, was huddled in meetings with advisers as she prepared to announce her selection of a running mate.
Her Republican opponent, former President Donald Trump, blamed Ms. Harris and the president for the market chaos, signaling the renewed importance of the economy and high prices as campaign themes.
“Of course there is a massive market downturn,” Mr. Trump said on social media. “Voters have a choice — Trump prosperity, or the Kamala crash & great depression of 2024.”
Sen. Tom Cotton, Arkansas Republican, posted on X: “If you think the economy is bad today, putting a San Francisco socialist in charge would make it much worse.”
Ms. Harris has been trying to calibrate her economic message as she takes over the Democratic campaign. “Bidenomics” has not sat well with voters who, despite a good employment picture for the past few years, have faced punishing price increases that canceled out wage gains.
Sen. J.D. Vance of Ohio, the Republican vice presidential nominee, will hold a campaign event in Philadelphia on Tuesday hours before Ms. Harris introduces her running mate to Democratic voters in the city. The Trump campaign gave a preview of Mr. Vance’s visit by saying, “The stock market is crashing because of weak and failed Kamala Harris’ policies. … In weak, failed, and dangerously liberal Kamala Harris’ America, families are struggling to afford the basics and stay safe.”
The Trump campaign said Pennsylvania families have had to pay an average of $958 more per month because of higher prices.
On Wall Street, some traders began wondering whether the damage was so severe that the Fed would have to cut interest rates in an emergency meeting before its next scheduled decision on Sept. 18. The central bank took no action on rates at its meeting last month.
“The Fed could ride in on a white horse to save the day with a big rate cut, but the case for an inter-meeting cut seems flimsy,” said Brian Jacobsen, chief economist at Annex Wealth Management. “Those are usually reserved for emergencies like COVID, and an unemployment rate of 4.3% doesn’t really seem like an emergency.”
Some of Wall Street’s recent declines may also be air coming out of a stock market that has ballooned to dozens of all-time highs this year, in part on a frenzy around AI technology and hopes for coming cuts to interest rates. Critics have been saying for a while that the stock market looked expensive after prices rose faster than corporate profits.
“Markets tend to move higher like they’re climbing stairs, and they go down like they’re falling out of a window,” said J.J. Kinahan, CEO of IG North America. He attributed much of the recent volatility to euphoria about AI subsidies and “a market that was ahead of itself.”
Professional investors pointed to the Bank of Japan’s move last week to raise its primary interest rate from nearly zero. Such a move helps boost the value of the Japanese yen, but it could also force traders to scramble out of deals for which they borrowed money at virtually no cost in Japan and invested it elsewhere around the world.
In some positive economic news Monday, a report said growth for U.S. service businesses was slightly stronger than expected. According to the Institute for Supply Management, growth was led by businesses in the arts, entertainment and recreation industries, along with accommodations and food services. Treasury yields also pared their drops after the better-than-expected data.
Others pointed to second-quarter annualized growth of 2.8% in the U.S., which was much stronger than expected.
For most of the year, investors worldwide drove stock markets higher, convinced that central banks were successfully, if haltingly, getting inflation under control. They were buoyed by a healthy U.S. economy and the promise of artificial intelligence.
By June, Nvidia, the leader in AI chipmaking, had joined Apple and Microsoft as $3 trillion companies. In mid-July, the S&P 500, Nasdaq composite and Japan’s Nikkei 225 had risen to all-time highs. Investors thought the high interest rates implemented by the Federal Reserve were taming inflation without causing a sharp slowdown in the U.S. economy, the world’s largest.
That confidence has taken a hit the past few days. Investors are listening to warnings that Nvidia and other Big Tech stocks have become too expensive and that massive spending on AI might not turn into profits for a while.
As the markets plummeted Monday, several online brokerage firms, including Charles Schwab, Fidelity and Vanguard, appeared to be down for thousands of users.
User reports appeared to peak around and just before 10 a.m. EDT, data from outage tracker Downdectector showed. Some frustrated customers online said that they were unable to log in or access their account balances.
“Due to a technical issue, some clients may have difficulty logging in to Schwab platforms,” Charles Schwab wrote on social media platform X. “Please accept our apologies as our teams work to resolve the issue as quickly as possible.”
By midday, Schwab confirmed that the issue had been resolved.
A Fidelity spokesperson told The Associated Press via email that the company was aware that some customers were experiencing “intermittent issues” earlier in the day but said that had been resolved.
Vanguard did not immediately return a request for comment.
At Charles Schwab’s peak, users reported nearly 15,000 outages around 9:50 a.m. EDT, per Downdetector. Fidelity and Vanguard had 3,800 and 2,900, respectively, closer to 10 a.m. EDT. User reports appeared to fall notably for all three platforms about an hour later.
• Stephen Dinan contributed to this article, which is based in part on wire service reports.
• Dave Boyer can be reached at dboyer@washingtontimes.com.
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