Dow Plummets 1,000 Points; Japanese Stocks Face Worst Crash Since 1987 Amid Global Market Turmoil

Concerns remain sky-high after Friday’s report indicated that U.S. employers significantly pulled back on hiring last month.

NEW YORK — Monday mirrored the catastrophic events of Black Monday 1987, with global markets plummeting and Wall Street experiencing extreme losses due to increasing fears of a slowing U.S. economy.

The S&P 500 plunged 3%, marking its worst day in nearly two years. The Dow Jones Industrial Average plummeted by 1,033 points, or 2.6%, while the Nasdaq composite fell 3.4%.

The downturn followed a global sell-off that started last week. Japan’s Nikkei 225 suffered a remarkable 12.4% plunge, its worst day since the infamous 1987 crash.

The downturn began when traders in Tokyo first reacted to Friday’s job report, which showed a much steeper than expected slowdown in U.S. employment. The data led to fears that the Federal Reserve had overextended its high-interest rate policies, aiming to curb inflation but potentially stalling the economy.

Some professional investors argue that technical factors may be amplifying market movements excessively. However, the losses remain substantial. South Korea’s Kospi index dropped 8.8%, and Bitcoin dipped below $54,000 from more than $61,000 on Friday.

Gold, typically a safe haven during volatile times, slipped about 1%.

Speculation arose that the Federal Reserve might need to cut interest rates in an emergency meeting before its next scheduled decision on Sept. 18. The yield on the two-year Treasury briefly dipped below 3.70% but later recovered to 3.89%.

“The case for an inter-meeting rate 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.”

The U.S. economy is still growing, and the stock market remains robust for the year. A recession is not guaranteed, but fears persist. The Fed has been transparent about the risks of hiking rates too aggressively or too softly.

Goldman Sachs economist David Mericle now estimates a 25% chance of a recession within the next 12 months, an increase from 15%, following Friday’s job report. However, he believes the economy is largely stable and does not foresee major financial imbalances.

Wall Street’s recent declines may merely reflect a correction in an over-inflated market. The rise of artificial-intelligence technology had driven stock prices higher than corporate profits justified.

“Markets tend to move up like stairs and go down like falling out of a window,” said JJ Kinahan, CEO of IG North America. He attributes recent worries to fading euphoria around AI and increasing pressure on companies to demonstrate profits from it.

Professional investors also noted that Japan’s recent interest rate hike could be affecting global markets. This could force traders who borrowed money at nearly zero interest in Japan to unwind those positions.

Treasury yields reduced their losses after a report showed marginally stronger growth in U.S. services businesses. The Institute for Supply Management indicated growth in arts, entertainment, recreation, accommodations, and food services.

Still, sectors closely tied to economic strength suffered. The Russell 2000 index of small companies dropped 3.3%, reversing recent gains.

Big Tech stocks, previously the market’s main drivers, also tumbled. Apple, Nvidia, and other major tech firms known as the “Magnificent Seven” experienced sharp declines.

Apple fell 4.8% on news that Warren Buffett’s Berkshire Hathaway had reduced its stake in the company. Nvidia dropped 6.4% amid reports of delayed AI chip development.

Alphabet fell 4.4% after a U.S. judge ruled Google had abused its dominance in the search engine market.

The S&P 500 fell 160.23 points to 5,186.33. The Dow sank 1,033.99 to 38,703.27, and the Nasdaq composite tumbled 576.08 to 16,200.08.

Other concerns are also impacting markets. The Israel-Hamas conflict could cause significant fluctuations in oil prices, adding to broader geopolitical worries. Upcoming U.S. elections could further complicate the market landscape.

Market volatility could influence election outcomes. Slower growth might decrease inflation but also put Vice President Kamala Harris on the defensive while compelling former President Donald Trump to pivot his campaign focus.

“It comes down to jobs,” said Quincy Krosby, chief global strategist for LPL Financial. Jobs drive consumer spending, a significant part of the U.S. economy.

“By election day, the unemployment rate will be extremely important.”