The fear of a U.S. recession has cast a dark cloud over global stock markets. Following a sharp drop in major Asian markets the previous day, all three major indices on the New York Stock Exchange also saw significant declines, leaving investors worldwide gripped by the fear of a ‘Black Monday.’

On the 5th, the Dow Jones Industrial Average plummeted by 1,033.99 points (-2.60%) to close at 38,703.27. The Dow has shed 1,528.81 points over the past two days.

The S&P 500 index fell by 160.23 points (-3.00%) to close at 5,186.33, while the tech-heavy Nasdaq index, which had plunged over 6% in early trading, ended the day down 576.08 points (-3.43%) at 16,200.08. Notably, both the Dow and S&P 500 indices recorded their biggest drops since September 13, 2022, nearly two years ago.

The U.S. Department of Labor’s July employment report, released on the 2nd, is cited as a major trigger for the panic selling in global markets. According to the report, nonfarm payrolls increased by only 114,000 last month, significantly below the forecasted 176,000 and the revised 179,000 from the previous month. This is the lowest level since the COVID-19 pandemic. The unemployment rate rose to 4.3%, up 0.2 percentage points from the previous month, marking the highest level since October 2021.

Asian markets took a direct hit overnight. Japan’s Nikkei index plunged by 12.4%, recording its largest drop since ‘Black Monday’ on October 20, 1987. South Korea’s KOSPI index fell by 10.54%, dropping below the 2,400 mark during the day, before closing at 2,441.55, down 8.7% from the previous trading day, marking its largest decline in history.

European markets also could not avoid the plunge. The pan-European Stoxx 600 index fell by 2.22% to close at 486.79 points. Germany's DAX dropped by 1.95% to 17,317.58, France's CAC 40 fell by 1.61% to 7,134.78, and the UK's FTSE index declined by 2.04% to 8,008.23.

Leading AI stock Nvidia, which had led a tech rally in the first half of the year, dropped over 6.36%, barely holding the $100 mark. Apple’s stock fell by 4.82% following news that major investor Warren Buffett had sold off about half of his Apple holdings during the first half of the year. Berkshire Hathaway’s stock also shrank by 3.36%. Other major companies, referred to as the ‘Magnificent 7,’ also saw declines: Google (-4.61%), Tesla (-4.23%), Amazon (-4.10%), Microsoft (-3.27%), and Meta (-2.54%) each experienced 2-4% drops in stock prices.

As demand for U.S. Treasury bonds continued to surge, the benchmark 10-year bond yield fell to 3.779%, its lowest level since June of the previous year. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX) rose by 15.18 points (64.90%) to 38.57.

CNN attributed the global financial market turmoil to three main factors: concerns over a U.S. recession, the Federal Reserve’s delayed response in lowering interest rates, and uncertainty regarding the performance of AI investments. Austan Goolsbee, president of the Federal Reserve Bank of Chicago, indicated that the Fed’s mission is to maximize employment and maintain financial stability. He suggested that if the current economic situation worsens significantly, the central bank would act to correct it, implying a potential interest rate cut to reduce market volatility.

<Reporter Park Hong-yong>