The Capitalist Pig hedge fund manager Jonathan Hoenig advises investors to focus on what’s working now in the markets, and it’s not Big Tech.
Stock futures plunged on Monday as U.S. recession fears caused turmoil throughout the global markets.
Dow Jones Industrial Average futures tumbled 1,300 points, while Nasdaq Composite futures slid 5%. S&P 500 futures also fell by more than 3.5%.
A weak jobs report and shrinking manufacturing activity in the world’s largest economy, coupled with dismal forecasts from the big technology firms, pushed the Nasdaq 100 and Nasdaq Composite into a correction last week.
“While Friday’s employment report was disappointing, it wasn’t the only worrisome economic indicator, only the latest,” said Greg McBride, Bankrate’s chief financial analyst. “Couple economic concerns with the cacophony of earnings disappointments and weak corporate outlooks, global unrest, and currency gyrations, and you have the recipe for sudden volatility.”
Dow Jones Industrial Average
THE JULY JOBS REPORT JUST TRIGGERED A RELIABLE RECESSION INDICATOR
The weak jobs data also triggered what is known as the “Sahm Rule,” seen by many as a historically accurate recession indicator.
“The July jobs report is being viewed as a recession warning, and the markets are responding accordingly,” said Bill Adams, chief economist at the Dallas-based Comerica Bank.
Traders work on the floor of the New York Stock Exchange during afternoon trading on March 27, 2024, in New York City. (Photo by Michael M. Santiago/Getty Images / Getty Images)
With the jobless rate unexpectedly rising, the so-called Sahm rule is now in play. Named after former Federal Reserve economist Claudia Sahm, the rule has successfully predicted every recession since 1970.
FED HOLDS INTEREST RATES STEADY AT 23-YEAR HIGH, BUT OPENS THE DOOR TO REDUCING RATES
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| I:DJI | DOW JONES AVERAGES | 39737.26 | -610.71 | -1.51% |
| SP500 | S&P 500 | 5346.56 | -100.12 | -1.84% |
| I:COMP | NASDAQ COMPOSITE INDEX | 16776.163609 | -417.98 | -2.43% |
It stipulates that the economy is in the early stages of a recession when the three-month moving average of the jobless rate is at least a half-percentage point higher than the 12-month low. Over the past three months, the unemployment rate has averaged 4.13%, which is 0.63 percentage points higher than the 3.5% rate recorded in July 2023, crossing that threshold.
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Big Wall Street brokerages also revised their Fed rate projections for 2024 to show greater policy easing by the central bank.
Japanese stocks also fell on Monday, with the Nikkei 225 index closing lower by more than 12% – 4,451.28 points – in its worst day since 1987.
Cryptocurrencies plunged as well, with the price of bitcoin falling 17.5% to $50,239 a coin on Monday morning. The price of ethereum slid 23% to $2,230 apiece.
FOX Business’ Megan Henney and Reuters contributed to this report.