The trading week kicked off with significant losses across major U.S. equity indices, reflecting a shift in investor sentiment towards safe-haven assets like bonds and gold. The catalyst for this sentiment was the release of disappointing data regarding the health of U.S. manufacturing activity. In May, the Institute for Supply Management (ISM) Manufacturing Purchasing Managers’ Index (PMI) dropped to 48.7, indicating a faster-than-expected contraction in the manufacturing sector. This followed on the heels of a bleak Chicago PMI report released on Friday, which revealed the lowest sentiment levels since May 2020.
Amidst this backdrop, the CBOE Volatility Index (VIX), often referred to as the market fear gauge, surged by 9%. This spike occurred on a day marked by temporary technical glitches that affected several NYSE-listed stocks, including notable companies like Berkshire Hathaway Inc. (NYSE: BRK) and Chipotle Mexican Grill Inc. (NYSE: CMG).
By midday in New York, the Nasdaq 100 index was down by 0.5%, potentially signaling its longest losing streak since early January 2024. Meanwhile, the Dow Jones Industrial Average lagged behind, primarily due to sharp losses in sectors like energy and industrials, which weighed down the blue-chip index.
The drop in U.S. Treasury yields added to market jitters, with yields falling nearly 10 basis points in the highest one-day decline since May 15. This marked the third-largest drop of the year. In response, investors turned to traditional safe-haven assets like bonds, driving up prices. The iShares 20+ Year Treasury Bond ETF (NASDAQ: TLT) gained 1.2%, aiming for its third consecutive day of gains.
As investors sought refuge from market volatility, gold prices rose by 0.9%, fully recovering from losses incurred on Friday. Similarly, Bitcoin (CRYPTO: BTC) saw a modest increase of 2.3%.
Major indices and ETFs reflected the overall market sentiment, with the Nasdaq 100, S&P 500, Russell 2000, and Dow Jones all registering losses. Notably, the tech-heavy Invesco QQQ Trust (ARCA: QQQ) and the SPDR Dow Jones Industrial Average ETF (NYSE: DIA) experienced declines, while the Health Care Select Sector SPDR Fund (NYSE: XLV) outperformed.
Several individual stocks made significant moves on Monday:
- Paramount Global (NASDAQ: PARA) rallied over 7% following the announcement of a merger agreement with Skydance.
- Meme stocks like GameStop Corp. (NYSE: GME) and AMC Entertainment Holdings Inc. (NYSE: AMC) experienced sudden spikes after trader Keith Gill revealed his significant holdings in GME.
- Lattice Semiconductor Corp. (NASDAQ: LSCC) plunged over 15% after its CEO departed to lead another company.
- Spotify Technology S.A. (NYSE: SPOT) rose 4% after announcing heightened subscription costs for its premium users.
- Science Applications International Corp. (NASDAQ: SAIC) plummeted 12% after missing revenue estimates.
Outside the U.S., Mexican assets experienced a sharp decline following Claudia Sheinbaum’s landslide victory in the country’s presidential election. The Mexican Peso and stocks sold off heavily, reflecting investor uncertainty about the future direction of Mexican economic policy.
In summary, Monday’s market performance was driven by concerns about economic growth and uncertainty surrounding U.S. manufacturing activity. This led investors to seek refuge in safe-haven assets and contributed to significant volatility across global markets.