Red Monday: Calls for Emergency Fed Rate Cut Grow

U.S. stocks suffered their worst day since 2022 on Monday, with the S&P 500 dropping 3.0%, the Nasdaq falling 3.4%, and the Dow Jones Industrial Average plunging by 1,033 points. All sectors ended in the red, with mega-cap tech stocks hit hardest—NVIDIA dropped as much as 15% during the day before recovering slightly to close down 6.4%.

Market turmoil was driven by fears that the Federal Reserve is lagging in cutting interest rates, the potential unwinding of the yen carry trade, and recession signals from the Sahm Rule, which was triggered after unemployment rose to 4.3%.

While some analysts have called for an emergency Fed rate cut to stabilise markets, such a move is seen as unlikely at this stage, as the sell-off, though severe, is not yet viewed as an existential threat to the broader economy.

Global markets also faced heavy selling. Japan’s stock market experienced its steepest decline since Black Monday in 1987, adding to fears of widespread instability. Risk assets were similarly affected, with Bitcoin plunging from nearly $62,000 on Friday to around $54,000 by Monday.

Some relief came from the ISM Services PMI, which showed a stronger-than-expected rebound in the U.S. services sector, helping to ease investor concerns slightly.