On Thursday, U.S. stock markets endured a significant setback, marking their second consecutive day of sharp declines. The S&P 500 Index fell by over 1%, extending the losses seen on the previous trading day. The sharp retreat was part of a broader market downturn that began with substantial declines in major technology stocks. Prominent tech giants like Google and Amazon saw their share prices drop by more than 1%, contributing to a steep decline in the tech-heavy Nasdaq Composite, which plunged as much as 1.13% during the day.
This recent sell-off was exacerbated by a broader market rout that impacted nearly every sector within the S&P 500. The downturn gained momentum on Wednesday when the semiconductor sector was hit hard by news of potential new trade restrictions involving China. Companies like Nvidia, which had been pivotal in the tech boom driven by artificial intelligence (AI), saw their stock prices tumble sharply. This decline continued through Thursday, with the S&P 500 closing 0.7% lower after initially falling more steeply.
Small-cap stocks, which had previously benefited from optimism about potential rate cuts and a favorable economic environment, also suffered. The Russell 2000 Index, which represents small-cap companies, dropped by 2.19% on Thursday, reflecting the widespread nature of the market sell-off.
Compounding the market’s woes, initial jobless claims for the week ending July 13 rose to 243,000, surpassing economists’ expectations of 229,000. This increase in claims signaled a potential softening in the labor market, which in turn heightened speculation that the Federal Reserve might consider cutting interest rates later this year. The cooling job market could prompt the Fed to adopt more accommodative monetary policies to stimulate economic growth.
As of the market close on Thursday, the major U.S. stock indexes were positioned as follows:
- S&P 500: 5,544.59, down 0.78%
- Dow Jones Industrial Average: 40,665.02, down 1.29%, or 533.06 points
- Nasdaq Composite: 17,871.22, down 0.7%
In addition to the market movements, several key financial and economic issues were highlighted:
- Earnings Reports and AI Stocks: Goldman Sachs is anticipating that Nvidia’s upcoming earnings report will address concerns from critics regarding the artificial intelligence sector, potentially providing a boost to investor confidence.
- Federal Reserve Policy: Jamie Dimon, CEO of JPMorgan Chase, has suggested that the Federal Reserve should refrain from cutting interest rates until inflationary pressures are more effectively managed. His comments reflect ongoing debates about the appropriate monetary policy response to current economic conditions.
- Market Valuations: Societe Generale warned that current market valuations are overstretched and could represent a ‘timebomb’ that might disrupt the ongoing market rally. Their caution highlights concerns that elevated stock prices could lead to significant corrections.
In commodities and financial markets:
- Crude Oil: West Texas Intermediate crude oil prices fell by 0.64% to $82.32 per barrel, while Brent crude, the international benchmark, decreased by 0.41% to $82.02 per barrel. The declines in oil prices reflect broader market uncertainties and shifting supply-demand dynamics.
- Gold: Gold prices dropped by 0.38% to $2,463.51 per ounce, continuing a trend of fluctuations in precious metals amid market volatility.
- Treasury Yields: The yield on the 10-year U.S. Treasury note increased by five basis points, reaching 4.197%, reflecting investor reactions to economic data and monetary policy expectations.
- Bitcoin: Bitcoin experienced a decline of 0.65%, bringing its price to $63,677. The cryptocurrency market continues to exhibit volatility amid broader financial market developments.