Global stock markets experienced significant declines, with Nvidia stock and Japan’s Nikkei 225 index bearing the brunt of investor anxiety. The tech-focused Nasdaq index dropped by 6%, while the broader S&P 500 index fell by 4.2%, driven by fears of an impending US recession. The Dow Jones Industrial Average also took a hit, losing over 1,100 points, marking a 2.8% decline. However, the most staggering loss was witnessed in Japan, where the Nikkei 225 suffered its biggest decline since the Black Monday crash of 1987, falling by 12%.
The market turmoil was largely precipitated by disappointing US jobs data, which revealed that the US economy added only 114,000 jobs last month, significantly lower than expected. This weak performance, coupled with rising jobless rates, sparked fears that the Federal Reserve might have delayed critical measures to support the economy. Investors, wary of a potential recession in the world’s largest economy, began to offload riskier assets, leading to a global sell-off.
Nvidia, a leading player in the tech industry, faced severe repercussions from this market downturn. The company’s stock dropped by 10% on Monday, its lowest since May, and is now 28% below its peak. This decline comes amid broader concerns about the sustainability of the recent tech rally fueled by artificial intelligence advancements. The delays in Nvidia’s next-generation AI processor, the Blackwell B200, due to a design flaw, have further exacerbated investor fears. Reports indicated that Nvidia informed key customers, including Microsoft, about the delay, which could push the product’s release by at least three months.
Despite reassurances from analysts that Nvidia’s competitive edge remains strong, the market reacted negatively. Raymond James analyst Srini Pajjuri maintained a strong buy rating on Nvidia, noting that a few months’ delay should have a limited impact on the company’s near-term estimates. However, the sentiment was not enough to stave off the sell-off, as Nvidia’s stock tumbled alongside other tech giants like Apple and Amazon, which saw declines of over 4%.
Japan’s Nikkei 225 index, which had already been under pressure due to the Bank of Japan’s decision to raise interest rates, experienced its worst one-day drop in nearly four decades. The index plummeted by 4,451 points, a 12% decline, pushing it into bear market territory. The market’s reaction was partly fueled by concerns over the impact of a stronger yen on Japanese exporters. The yen surged by 2.6% against the US dollar, adding to the pressure on the Japanese stock market.
The ripple effect of these declines was felt across global markets. South Korea’s Kospi fell by 9%, Germany’s DAX was down by 2%, and indices in Australia, Hong Kong, and China also saw significant drops. The global sell-off highlighted the interconnectedness of today’s financial markets and the widespread impact of economic uncertainty in the United States.
In the midst of this turmoil, safer assets like government bonds saw increased demand. The yield on 10-year US bonds fell by 10 basis points to 3.68%, the lowest since June 2023, as investors sought refuge from the volatility.
The VIX, Wall Street’s “fear gauge,” soared to its highest level since the coronavirus pandemic, reflecting the heightened anxiety among investors. As markets continue to navigate these turbulent times, the focus remains on how central banks, particularly the Federal Reserve, will respond to the growing fears of a global economic slowdown.