Wall Street Sees Sudden Sell-Off, Prompting New Fears of Recession

Stocks took a dramatic tumble on Monday in response to a variety of factors, including a modest jobs report from last week that was substantially less than experts predicted.

The Dow Jones Industrial Average dropped more than 1,000 points, or some 2.6% overall, ending the day at 38,703. The percentage decline was even greater with the Nasdaq Composite, which registered a 3.4% drop.

That jobs report showed a gain of only 114,000 new jobs, less than the 175,000 that many economists had predicted. But Wall Street uneasiness was additionally sparked by the announcement from the Federal Reserve’s Board of Governors keeping interest rates at their current 5.2% to 5.5% level.

“Financial markets are supposed to capture the wisdom of the crowd,” noted the Wall Street Journal of the sudden decline. “But on Monday the crowd ran in all directions, waving its hands in the air screaming.”

The fever was global, with the Financial Times noting that “trading in both Topix and Nikkei futures was suspended during the afternoon session as the selling frenzy continued into the close, hitting ‘circuit breaker’ levels that automatically stop trading.”

Investor nervousness was additionally stoked by a Bank of Japan rate rise and a decline in Artificial Intelligence stocks.

What’s next depends upon perspective, with the New York Times reporting that “some investors saw the sell-off as a sign that the U.S. economy was at risk of recession.”

Other experts have downplayed recession prospects. In an interview with USA Today, Scott Wren, Wells Fargo senior global marketing strategist, remarked: “The recession fears are overblown. It’s not time to panic here.”

While the single-digit stock decline on Monday was obviously enough to prompt concern, Wall Street historians note that it still didn’t come close to the 22.6% Dow decline in October of 1987, or the famous 25% loss in October of 1929, which prompted the beginning of the Great Depression.

​By Garry Boulard

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