US stock futures plunge as recession fears grip global markets

US stock index futures plunged on Monday, with Nasdaq futures down almost 4 per cent, following warnings of a possible recession in the United States that sent shock waves across global markets.

This was after sharp losses in Asian and European stock markets and a flight to safe-haven assets like bonds - which saw their yields plunge.
Steep sell-offs in all major mega-cap and growth stocks pre-market trading had occurred, which propelled the indexes to record highs earlier this year.

Apple dropped 7.3 per cent after Berkshire Hathaway significantly cut its stake in the iPhone maker by almost 50 per cent.

That could indicate the famous investor is becoming wary of the broader US economy—or simply warier of stock market valuations that have risen too far.

Apart from this, Nvidia fell 6.8 per cent over reports of delays in launching its new artificial intelligence chips on account of design flaws.

At 4:33 a.m. ET, Dow e-minis were down 613 points, or 1.54 per cent; S&P 500 e-minis lost 117.5 points, or 2.19 per cent, while Nasdaq 100 e-minis sank 644.75 points, or 3.47 per cent.

Recent economic indicators have only exacerbated market concerns. Weak jobs reports and manufacturing activity at a glance, in conjunction with grim forecasts from major technology firms, moved the Nasdaq 100 and Nasdaq Composite into correction last week.

This bad job number will also trigger the "Sahm Rule," a historically reliable indicator of recession.

The latest data has forced traders to price in a 91.5 per cent chance the US Federal Reserve will cut benchmark interest rates by 50 basis points at its September meeting, with expectations year-end rates will drop to 4-4.25 per cent from the current 5.25 per cent-5.50 per cent, according to the CME's FedWatch Tool.

Reflecting this, top Wall Street brokerages have also revised their Fed rate projections for 2024 as well, with the central bank seen to implement more aggressive policy easing.

Although Ronald Temple, the chief market strategist at Lazard, wondered if the Fed would begin the easing process by 50 basis points, he said comparable data in the next seven weeks would compel the Fed to act in no uncertain terms.

This week, a number of Federal Reserve officials are set to speak about the economy and monetary policy. Their words may help assuage investors' fears about interest rate cuts on the horizon.

Notable speeches include Chicago Fed President Austan Goolsbee at 8:30 a.m. ET and San Francisco Fed President Mary Daly later in the day. Small-cap index futures plummeted as well, with Russell 2000 futures off 3.7 per cent. The CBOE Volatility Index, Wall Street's so-called "fear gauge," shot above its long-term average of 20 points last week and hit 35.19, the highest since May 2022.

The stock market pounded crypto-linked stocks, with the world's biggest cryptocurrency, Bitcoin, falling to a five-month low.

This translated into heavy losses for connected stocks: Coinbase Global was down 9.9 per cent, US-listed shares of Bitfarms fell by 10.1 per cent, MicroStrategy slid 12.8 per cent, and Riot Platforms declined by 9.8 per cent.