New York — U.S. stocks are bouncing back, and calm is returning to Wall Street after Japan’s market soared earlier Tuesday to claw back much of the losses from its worst day since 1987.   

The S&P 500 was rallying by 1.6% in midday trading and on track to break a brutal three-day losing streak. It had tumbled a bit more than 6% after several weaker-than-expected reports raised worries the Federal Reserve had pressed the brakes too hard for too long on the U.S. economy through high interest rates in order to beat inflation.   

The Dow Jones Industrial Average was up 480 points, or 1.2%, as of 11 a.m. Eastern time, and the Nasdaq composite was 1.7% higher. The vast majority of stocks were climbing in a mirror opposite of the day before, from smaller companies that need U.S. households to keep spending to huge multinationals more dependent on the global economy.   

Stronger-than-expected profit reports from several big U.S. companies helped drive the market. Kenvue, the company behind Tylenol and Band-Aids, jumped 12.7% after reporting stronger profit than expected thanks in part to higher prices for its products. Uber rolled 7.9% higher after easily topping profit forecasts for the latest quarter.   

Caterpillar veered from an early loss to a gain of 3.8% after reporting stronger earnings than expected but weaker revenue.  

Several technical factors may have accelerated the recent swoon for markets, beyond weak U.S. hiring data and other dispiriting U.S. economic reports, in what strategists at Barclays called “a perfect storm” for causing extreme market moves. One is centered in Tokyo, where a favorite trade for hedge funds and other investors began unraveling last week after the Bank of Japan made borrowing more expensive by raising interest rates above virtually zero.   

That scrambled trades where investors had borrowed Japanese yen at low cost and invested it elsewhere around the world. The resulting exits from those investments may have helped accelerate the declines for markets around the world.   

Japan’s Nikkei 225 jumped 10.2% Tuesday to claw back much of its 12.4% sell-off the day before, which was its worst since the Black Monday crash of 1987. Stocks in Tokyo rebounded as the value of the Japanese yen stabilized against the U.S. dollar following several days of sharp gains.   

“The speed, the magnitude and the shock factor clearly demonstrate” how much of the moves were driven by how traders were positioned, according to the strategists at Barclays led by Stefano Pascale and Anshul Gupta. That could indicate it wasn’t just worries about the U.S. economy.   

Still, some voices along Wall Street are continuing to urge caution.   

Barry Bannister, chief equity strategist at Stifel, is warning more drops could be ahead because of a slowing U.S. economy and sticky inflation. He’s forecasting both will be worse in the second half of this year than what much of Wall Street expects, while saying a measure of how expensive the U.S. stock market is still looks “frothy” when compared with bond yields and other financial conditions.   

The stock market’s “dip is not a blip,” he warned in a report, and called it “too soon to jump back in.”   

He had been predicting a coming “correction” in U.S. stock prices for a while, including an acknowledgement in July that his initial call was early. That was a couple days before the S&P 500 set its latest all-time high and then began sinking.   

While fears are rising about a slowing U.S. economy, it is still growing, and a recession is far from a certainty. The U.S. stock market is also still up a healthy amount for the year so far, and the Federal Reserve says it has ample room to cut interest rates to help the economy if the job market weakens significantly.   

The S&P 500 has romped to dozens of all-time highs this year, in part due to a frenzy around artificial-intelligence technology, and critics have been saying that’s sent stock prices too high in many cases.   

They’ve pointed in particular to Nvidia, Apple and the other handful of Big Tech stocks in the “Magnificent Seven” that were the main reason the S&P 500 set so may records this year. Propelled in part by the mania around AI, they helped overshadow weakness across other areas of the stock market, which were struggling under the weight of high interest rates.   

A set of underwhelming profit reports recently, kicked off by Tesla and Alphabet, added to the pessimism and dragged Big Tech stocks lower. Nvidia dropped nearly 19% from the start of July through Monday on such concerns, but it rose 4.8% Tuesday and was one of the strongest forces pushing upward on the market.   

Apple, though, fell another 0.8% and was the heaviest weight on the S&P 500.   

In the bond market, Treasury yields were ticking higher to claw back some of their sharp drops since April, driven by rising expectations for coming cuts to interest rates by the Federal Reserve.   

The yield on the 10-year Treasury rose to 3.86% from 3.78% late Monday. It had briefly dropped below 3.70% during Monday when fear in the market was spiking and investors were speculating the Federal Reserve could even have to call an emergency meeting to cut interest rates quickly. 
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Bangkok — Japan’s benchmark Nikkei 225 index soared more than 10% on Tuesday, rebounding after a rollercoaster start to the week that sent markets tumbling in Europe and on Wall Street.

European markets were mostly lower, with Germany’s DAX down 0.4% at 17,277.27 and the CAC 40 in Paris 0.7% lower, at 7,098.89.

In London, the FTSE 100 shed 0.4% to 7,974.44.

Those modest declines and gains in Asia suggested a respite from the turmoil of the past two trading sessions, when the Nikkei lost a combined 18.2% and other markets also swooned. U.S. futures showed solid gains, with the contract for the S&P 500 up 0.5% and that for the Dow Jones Industrial Average gaining 0.3%.

Monday’s plunge reminiscent of a crash in 1987 that swept around the world pummeled Wall Street with more steep losses, as fears worsened about a slowing U.S. economy.

The Nikkei gained nearly 11% early Tuesday and bounced throughout the day to close up 3,217.04 points at 34,675.46 as investors snapped up bargains after the 12.4% rout of the day before.

“Calm finally appears to be returning,” Bas van Geffen of Rabobank said in a report. The Nikkei’s 10% gain didn’t make up for Monday’s loss, he said, “but at least it takes some of the ‘panic’ out of the selling.”

The dollar rose to 144.87 yen from 144.17 yen. The yen’s rebound against the dollar after the Bank of Japan raised its main interest rate on July 31 was one factor behind the recent market swings, as investors who had borrowed in yen and invested in dollar assets like U.S. stocks sold their holdings to cover the higher costs of those “carry trade” deals.

Elsewhere in Asia, South Korea’s Kospi jumped 3.3% to 2,522.15. It had careened 8.8% lower on Monday.

Hong Kong’s Hang Seng index gave up early gains to close 0.3% lower at 16,647.34. The Shanghai Composite index, largely bypassed by Monday’s drama, rose 0.2% to 2,867.28.

In Australia, the S&P/ASX 200 advanced 0.4% to 7,680.60 as the central bank kept its main interest rate unchanged. Taiwan’s Taiex was up 1.2% after plunging 8.4% the day before and the SET index in Bangkok gained 0.3%.

On Monday, the S&P 500 dropped 3% for its worst day in nearly two years. The Dow declined 2.6% and the Nasdaq composite slid 3.4%.

The global sell-off that began last week and gained momentum after a report Friday showed that American slowed their hiring in July by much more than economists expected. That and other weaker than expected data added to concern the Federal Reserve has pressed the brakes on the U.S. economy by too much for too long through high interest rates in hopes of stifling inflation.

But sentiment was helped by a report Monday by the Institute for Supply Management said growth for U.S. services businesses was a touch stronger than expected, led by the arts, entertainment and recreation sectors, along with accommodations and food services.

The U.S. economy is still growing, so a recession is far from certain. The U.S. stock market is still up a healthy amount for the year, with double-digit percentage gains for the S&P 500, the Dow and the Nasdaq.

Markets have romped to dozens of all-time highs this year, in part due to a frenzy around artificial-intelligence technology and critics have been saying prices looked too expensive.

Other worries also are weighing on the market. The Israel-Hamas war and other global hotspots could cause sharp swings for the price of oil.

Early Tuesday, U.S. benchmark crude oil was up 12 cents at $73.06 per barrel. Brent crude, the international standard, picked up 3 cents to $76.33 per barrel.

The euro fell to $1.0910 from $1.0954.
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Islamabad — Pakistan’s military revealed Monday that millions of liters of Iranian oil are being smuggled into the country each day, but rejected long-standing allegations that it is also playing a role in the illegal trade.

Lt. Gen. Ahmed Sharif Chaudhry, the army spokesperson, told a televised news conference that “consistent efforts” are being made to enhance security along the country’s more than 900-kilometer border with Iran in order to restrict oil smuggling.

“If you look at the numbers, [the fuel smuggling] has come down from 15-16 million liters per day to 5-6 million liters per day, thanks to the combined efforts of the army, Frontier Corps [paramilitary force], law enforcement, and intelligence agencies,” Chaudhry stated.

He did not provide further details, but Chaudhry is the first Pakistani official to publicly share estimates regarding the ongoing large-scale illegal oil trade between the two countries.

A rare comprehensive investigative report on the long-running illicit trade, conducted by two Pakistani official spy agencies and leaked to local media last May, revealed that Iranian traders smuggle more than $1 billion worth of petrol and diesel into Pakistan annually.

The probe found that the illegal fuel supply accounted for about 14% of Pakistan’s yearly consumption, resulting in hundreds of millions of dollars in losses “to the exchequer.”

The report identified more than 200 oil smugglers as well as government and security officials benefiting from the lucrative illegal oil trade. 

It said that up to 2,000 vehicles, each with a capacity of 3,200-3,400 liters, are used daily to transport diesel across the border. Additionally, some 1,300 boats, each with a capacity of “1,600 to 2,000” liters, are also used to smuggle Iranian fuel.

Petroleum dealers attributed the surge in cross-border smuggling to years of U.S.-led Western sanctions on the Iranian oil sector, which compelled Tehran to seek alternative markets for its exports.

Iranian traders reportedly sell fuel in their local currency to buyers in Pakistan’s southwestern border province of Baluchistan and collect dollars from the Pakistani market. The illegal fuel is then transported elsewhere in the South Asian nation.

Islamabad mainly sources its fuel from the Middle East. The government has dramatically raised fuel prices in recent months as part of efforts to secure a new International Monetary Fund loan of about $7 billion. 

Due to depleting foreign exchange reserves, analysts believe cash-strapped Pakistan could be allowing Iranian oil to be smuggled into the country to fulfill domestic needs.

Chaudhry, while speaking Monday, cautioned that sealing the border with Iran to stop the long-standing oil smuggling without providing alternative livelihood opportunities could have disastrous consequences for poverty-stricken and underdeveloped Pakistani border towns.

The intelligence report published in May estimated that up to 2.4 million individuals in insurgency-hit Balochistan relied on the smuggling of Iranian oil for their sustenance, and they would be left without means of survival if the illicit trade were to cease.

Pakistani government officials did not immediately respond to VOA inquiries seeking a response to Monday’s revelations in time for publication.

Afghan border

Meanwhile, the military spokesperson criticized neighboring Afghanistan’s Taliban rulers for not effectively guarding their side of the nearly 2,600-kilometer border between the two countries.

Chaudhry stated that the Pakistani military has established more than 1,450 border posts while the Afghan side has only more than 200. He argued that the Taliban’s limited number of posts could result from apathy or lack of resources to staff the border crossings.

“Interestingly, it’s not just the lesser number of posts or the border guards,” the army spokesperson said. “We have also noticed that whenever illegal movement or smuggling attempts occur, or people are assisted in crossing the border, gunfire is typically initiated from the Afghan side, or other tactics are used to facilitate such activities.”

Pakistan maintains that anti-state militants have moved their sanctuaries to Afghanistan since the Taliban regained control of the country three years ago and intensified cross-border attacks, killing hundreds of Pakistani security forces and civilians.

There was no immediate reaction from Taliban authorities to Pakistani allegations, but they have previously rejected them as baseless, saying terrorist groups do not operate on Afghan soil and that nobody is allowed to threaten neighboring countries. 
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AMSTERDAM — Semiconductor industry group SEMI Europe called on the European Union on Monday to place as few restrictions as possible on outbound investment in foreign computer chip technology by companies based in the bloc. 

Proposals to screen outbound investment — European capital being invested in foreign semiconductor, AI and biotechnology companies — are being considered, though no EU decision is expected before 2025. 

The U.S. has issued draft rules for banning some such investments in China that could threaten U.S. national security, part of a broader push to prevent U.S. know-how from helping the Chinese to develop sophisticated technology and dominate global markets. 

“European semiconductor companies must be as free as possible in their investment decisions or otherwise risk losing their agility and relevance,” SEMI Europe said in a paper outlining its recommendations. 

It said policies under consideration by the EU appear to be overly broad and if adopted could force companies to disclose sensitive business information, adding that restrictions on cross-border research cooperation would be misplaced. 

“We encourage the European Commission to further address these aspects and to not infringe on the ability of European multinational companies to carry out the necessary investments to sustain their operations,” it said. 

SEMI Europe represents about 300 Europe-based semiconductor firms and institutions, including companies such as ASMLASML.AS, ASMASMI.AS, InfineonIFXGn.DE, STMicroelectronicsSTMPA.PA, NXPNXPI.O, and research centers such as imec, CEA-Leti and Fraunhofer. 

Alongside the proposals for outbound investment screening, the EU has also been moving towards a law that screens inbound investments of foreign capital that might pose a security risk, such as purchases of European ports, nuclear plants and sensitive technologies. 

 
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New York — Nearly everything on Wall Street is tumbling Monday as fear about a slowing U.S. economy worsens and sets off another sell-off for financial markets around the world.

The S&P 500 was down by 3.1% in early trading, coming off its worst week in more than three months. The Dow Jones Industrial Average was down 996 points, or 2.5%, as of 9:50 a.m. Eastern time, and the Nasdaq composite slid 3.8%.

The drops were just the latest in a sell-off that swept the Earth. Japan’s Nikkei 225 helped start Monday by plunging 12.4% for its worst day since the Black Monday crash of 1987.

It was the first chance for traders in Tokyo to react to Friday’s report showing U.S. employers slowed their hiring last month by much more than economists expected. That was the latest piece of data on the U.S. economy to come in weaker than expected, and it’s all raised fear the Federal Reserve has pressed the brakes on the U.S. economy by too much for too long through high interest rates in hopes of stifling inflation.

Losses elsewhere in the world were nearly as neck-snapping. South Korea’s Kospi index careened 8.8% lower, stock markets across Europe sank roughly 3% and bitcoin dropped 12%.

Even gold, which has a reputation for offering safety during tumultuous times, slipped 1.6%.

That’s in part because traders are 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 Sept. 18. The yield on the two-year Treasury, which closely tracks expectations for the Fed, fell to 3.79% from 3.88% late Friday and from 5% in April.

“The Fed could ride in on a white horse to save the day with a big rate cut, but the case for an inter-meeting cut seems flimsy,” said Brian Jacobsen, chief economist at Annex Wealth Management. “Those are usually reserved for emergencies, like COVID, and an unemployment rate of 4.3% doesn’t really seem like an emergency.”

“The Fed could respond by stopping” the shrinking of its holdings of Treasurys and other bonds, which could put less upward pressure on longer-term yields, he said. “That could at least by a symbolic action that they’re not blind to what’s going on.”

Of course, the U.S. economy is still growing, and a recession is far from assured. The Fed has been clear about the tightrope it began walking when it started hiking rates sharply in March 2022: Being too aggressive would choke the economy, but going too soft would give inflation more oxygen and hurt everyone.

After leaving the federal funds rate steady last week, before several discouraging economic reports hit, Fed Chair Jerome Powell said officials “have a lot of room to respond if we were to see weakness” in the job market after raising their main rate to the highest level in more than two decades.

Goldman Sachs economist David Mericle sees a higher chance of a recession following Friday’s jobs report. But he still sees only a 25% chance of that, up from 15%, in part “because the data look fine overall” and he does not “see major financial imbalances.”

Still, stocks of companies whose profits are most closely tied to the economy’s strength took heavy losses on the fears about a sharp slowdown. The small companies in the Russell 2000 index dropped 5.5%, further dousing what had been a revival for it and other beaten-down areas of the market.

Making things worse for Wall Street, Big Tech stocks also tumbled sharply as the market’s most popular trade for much of this year continued to unravel. Apple, Nvidia and a handful of other Big Tech stocks known as the “ Magnificent Seven ” had propelled the S&P 500 to dozens of all-time highs this year, in part on a frenzy around artificial-intelligence technology. They were so strong that they overshadowed weakness for areas of the stock market weighed down by high interest rates.

But Big Tech’s momentum turned last month on worries investors had taken their prices too high and expectations for future growth are becoming too difficult to meet. A set of underwhelming profit reports from Tesla and Alphabet added to the pessimism and accelerated the declines.

Apple fell 4.6% Monday after Warren Buffett’s Berkshire Hathaway disclosed that it had slashed its ownership stake in the iPhone maker.

Nvidia, the chip company that’s become the poster child of Wall Street’s AI bonanza, fell even more, 8.3%. Analysts cut their profit forecasts over the weekend for the company after a report from The Information said Nvidia’s new AI chip is delayed. It has trimmed its gain for the year to 98.7% from 170% in the middle of June.

Because the Magnificent Seven companies have grown to be the market’s biggest by market value, the movements for their stocks carry much more weight on the S&P 500 and other indexes.

Worries outside corporate profits, interest rates and the economy are also weighing on the market. The Israel-Hamas war may be worsening, which beyond its human toll could also cause sharp swings for the price of oil. That’s adding to broader worries about potential hotspots around the world, while upcoming U.S. elections could further scramble things.
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New York — Economic fears are roiling Wall Street, as worries grow that the Federal Reserve may have left interest rates elevated for too long, allowing them to hurt U.S. growth.

Alarming economic data in recent days have deepened those concerns. U.S. job growth slowed more than expected in July, a Friday report showed, while the unemployment rate increased to 4.3%, heightening fears that a deteriorating labor market could make the economy vulnerable to a recession.

The jobs report exacerbated a selloff in stocks that began on Thursday, when data showing weakness in the labor market and manufacturing sector pushed investors to dump everything from chip stocks to industrials while piling into defensive plays.

Richly valued tech stocks tumbled further on Friday, extending losses in the Nasdaq Composite .IXIC to more than 10% from a record closing high reached in July. The benchmark S&P 500 index .SPX has slid 5.7% from its July peak.

“This is what a growth scare looks like,” said Wasif Latif, president and chief investment officer at Sarmaya Partners. “The market is now realizing that the economy is indeed slowing.”

For months, investors had been heartened by cooling inflation and gradually slowing employment, believing they bolstered the case for the Fed to begin cutting interest rates. That optimism drove big gains in stocks: the S&P 500 remains up 12% this year, despite recent losses; the Nasdaq has gained nearly 12%.

Now that a September rate cut has come into view following a Fed meeting this week, investors are fretting that elevated borrowing costs may already be hurting economic growth. Corporate earnings results, which saw disappointments from companies such as Amazon, Alphabet and Intel, are adding to their concerns.

“We’re witnessing the fallout from the curse of high expectations,” said James St. Aubin, chief investment officer at Ocean Park Asset Management. “So much had been invested around the scenario of a soft landing, that anything that even suggests something different is difficult.”

Next week brings earnings from industrial bellwether Caterpillar CAT.N and media and entertainment giant Walt Disney DIS.N, which will give more insight into the health of the consumer and manufacturing, as well as reports from healthcare heavyweights such as weight-loss drugmaker Eli Lilly LLY.N.

Bets in the futures markets on Friday suggested growing unease about the economy. Fed fund futures reflected traders pricing an over-70% chance of a 50-basis point cut at the central bank’s September meeting, compared to 22% the day before, according to CME FedWatch. Futures priced a total of 116 basis points in rate cuts in 2024, compared to just over 60 basis points priced in on Wednesday.

Broader markets also showed signs of unease. The Cboe Volatility index .VIX – known as Wall Street’s fear gauge – hit its highest since March 2023 on Friday as demand for options protection against a stock market selloff rose.

Meanwhile, investors have rushed into safe haven bonds and other defensive areas of the market. U.S. 10-year yields – which move inversely to bond prices – on Friday dropped as low as 3.79%, the lowest since December.

Sectors that are often popular during times of economic uncertainty are also drawing investors.

Options data for the Health Care Select Sector SPDR Fund XLV.P showed the average daily balance between put and call contracts over the last month at its most bullish in about three years, according to a Reuters analysis of Trade Alert data. Trading in the options on Utilities Select Sector SPDR Fund XLU.P also shows a pullback in defensive positioning, highlighting traders’ expectations for strength for the sector.

The healthcare sector .SPXHC is up 4% in the past month, while utilities .SPLRCU are up over 9%. By contrast, the Philadelphia SE Semiconductor index .SOX is down nearly 17% in that period amid sharp losses in investor favorites such as Nvidia NVDA.O and Broadcom AVGO.O.

To be sure, some investors said the data could just be a reason to lock in profits after the market’s overall strong run in 2024.

“This is a good excuse for investors to sell after a huge year to date rally,” said Michael Purves, CEO of Tallbacken Capital Advisors. “Investors should be prepared for some major volatility, particularly in the big tech stocks. But it will probably be short-lived.” 
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