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Investors Hoping For Better Day After Monday's Crushing Losses

Investors Hoping For Better Day After Monday's Crushing Losses

Wall Street is hoping for a rebound today after a global market selloff on Monday led to the Dow Jones Industrial Average experiencing its worst day in nearly two years. The selloff was triggered by fears that the U.S. economy is heading towards a recession and concerns that the Federal Reserve may have waited too long to cut interest rates to support an economic slowdown.

The Dow Jones Industrial Average lost a staggering 1,033 points to close at 38,703, marking a 2.6% drop. The S&P 500 shed 160 points to end at 5,186, a 3% drop, marking its worst day since September 2022. The Nasdaq Composite plummeted by 576 points to close at 16,200, a 3.4% drop.

The global selloff began in Asia, with Japan's Nikkei 225 plunging 12.4%, its worst day since the Black Monday crash of 1987. This was the first chance for traders in Tokyo to react to Friday's report showing that U.S. employers slowed their hiring last month by much more than economists expected. This report, along with other recent weaker-than-expected data on the U.S. economy, has raised fears that the Federal Reserve has kept interest rates too high for too long in an attempt to curb inflation, thereby potentially slowing down the U.S. economy.

Despite the steep losses, some professional investors cautioned that some technical factors could be amplifying the action in markets and that the drops may be overdone. However, the losses were still significant. South Korea's Kospi index fell 8.8%, and bitcoin dropped below $54,000 from more than $61,000 on Friday.

The price of gold, often seen as a safe haven during tumultuous times, slipped about 1%. This is partly because traders began wondering if the damage has been so severe that the Federal Reserve will have to cut interest rates in an emergency meeting before its next scheduled decision on September 18.

The Federal Reserve only considers emergency cuts, ones that occur outside its regularly scheduled meetings, in extreme situations. The most recent one happened on March 15, 2020, when central bankers lowered borrowing costs to near-zero as the onset of the coronavirus pandemic sent panic coursing across global markets.

Investors are now dumping stocks because they have become nervous that the economy might fall into a recession. However, the U.S. economy is still growing, the U.S. stock market is still up a healthy amount for the year, and a recession is far from a certainty.


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