Stocks set to tumble amid fears of U.S. economic slowdown

U.S. stocks are poised to tumble for a third consecutive trading day amidst growing fears of an economic downturn, with Wall Street concerned about a sharp slowdown in hiring and weakening consumer spending. 

Before the start of trade on Monday, S&P 500 futures sank 3.1% and Nasdaq futures plunged 4.7%. Investors are fleeing the Big Tech names that until recently had powered the U.S. market higher: Apple fell more than 7% and Meta was down 6% in premarket trading. Chipmaker Nvidia tumbled 12.5%.

Futures for the Dow Jones Industrial Average fell 2.1%.

Stocks began losing ground on Thursday after weak reports on manufacturing and construction, which stoked fears the U.S. economy may finally be buckling under the pressure of high interest rates. Then on Friday, government data showed that hiring last month was far weaker than expected, adding to Wall Street’s fears that economy’s so-called “soft landing,” in which the U.S. economy could avoid a recession despite the highest interest rates in 23 years, could instead become a hard landing. 

“The main factor that has staying power is the economy’s slowdown,” wrote Wells Fargo head of global investment strategy Paul Christopher in a Monday research note. “Investors have been watching household financial stress build for the past two years, but during that time, job growth remained above its December 2009-December 2019 average of 180,000 new jobs per month.”

But Friday’s jobs report showed that employers added only 114,000 new jobs last month, far fewer than the 175,000 jobs expected by economists, he noted. 

With the disappointing economic data, Wall Street is worried that the Federal Reserve may have kept its benchmark interest rate too high for too long, heightening the risk of a recession. The central bank kept the federal funds rate unchanged when it met on July 31 to discuss economic conditions and whether and when it should begin cutting rates.

A rate cut would make it less expensive for U.S. households and companies to borrow money, but it could take time for the effects to boost the economy. On Monday, some investors called for the Fed to start cutting rates sooner rather than later to stave off an economic downturn.

“The Federal Reserve needs to start easing monetary policy more aggressively than had been anticipated, in order to head off a looming recession in the world’s largest economy,” said Nigel Green, CEO of deVere Group, an independent financial advisory and asset management firm, in an email. “The Fed was behind the curve at the beginning of the cycle, it cannot afford to be behind the curve this time too.”

—With reporting by the Associated Press.