Wall Street Decline: Fearing recession, ‘Magnificent Seven’ and financial sector record significant losses

Major indices on Wall Street fell on Monday as investors currently do not want to take risks due to fears of a recession in the U.S., as the latest economic data from this superpower triggered a major avalanche in global markets.

Market concerns eased somewhat as the day progressed, and stocks reduced losses after data showed that activity in the U.S. services sector recovered in July from its lowest level in four years.

The so-called group of ‘Magnificent Seven‘, or the set of seven most lucrative companies in the technology sector, which has been the main driver of stock indices that reached record highs this year, lost about $650 billion in market value during the day.

Apple fell by 3.9 percent after Berkshire Hathaway halved its stake in the company, signaling that billionaire Warren Buffett is becoming cautious regarding the broader U.S. economy or high valuations in the stock market.

Furthermore, Nvidia fell by 6.1 percent while Microsoft and Alphabet each fell by about three percent.

– Investors should actively rebalance their portfolios and closely monitor risks that could turn the U.S. towards recession – some analysts told foreign media.

The Dow Jones Industrial Average fell by 2.17 percent, the S&P 500 fell by 2.42 percent, and the Nasdaq Composite fell by 2.77 percent.

The U.S. labor market report and a reduction in production activities in this largest world economy, along with poor forecasts from major U.S. technology companies, pushed the Nasdaq 100 and Nasdaq Composite into correction last week.

Currently, according to CME’s FedWatch Tool, there is a 92.5 percent probability that the U.S. central bank will cut the benchmark interest rates by 50 basis points in September. Just for reference, the chances were around 11 percent last week.

Yields on U.S. government bonds fell to their lowest level in a year, and the closely watched gap between two-year and ten-year government securities became positive for the first time since July 2022, which usually indicates that the economy is heading for a downturn.

All 11 major sectors of the S&P 500 index traded in decline, with the IT and financial sectors being the most affected.

Citigroup fell by nearly five percent, Wells Fargo, Morgan Stanley, and Goldman Sachs each fell by about four percent, while JPMorgan Chase and Bank of America fell by 2.7 and 3.5 percent, respectively.

The S&P 500 bank index, which tracks a basket of large bank stocks, last fell by 3.3 percent, while the KBW regional banking index fell by four percent, Reuters reports.