Markets worry over recession and tech stock crash

Highest US jobless rate since 2021 and woes at tech giants spark fear of hard landing

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Is an impending recession and a fizzling tech bubble about to bring markets crashing down? That is the question on the minds of many investors as Wall Street stocks headed towards bear market territory last week.

Troubles and poor earnings at tech giants like Nvidia and Amazon simply reinforced jitters which were already reverberating amid a July US jobs report that prompted fears the world's biggest economy could be headed for a hard landing.

On Wall Street, the big board's Dow Jones Industrial Index dumped down another 610.71 points on Aug 2, giving up a total of 2.1 per cent of its value for the week as it settled at 39,737 points - just off its early July lows.

The broader S&P 500, which is often seen as a key indicator of the market's health, tripped 2.06 per cent to 5,346.56 points. Over the past 30 days, this index has fallen 4 per cent. Meanwhile, the tech-heavy Nasdaq, after diving 417.98 points on Aug 2, settled at 16,776.16 points, which translated into a 3.35 per cent loss for the week. The Nasdaq last entered correction territory in October 2023.

All this comes despite dovish remarks from Federal Reserve chairman Jerome Powell earlier in the week, indicating that rate cuts are imminent.

What worries the market are two factors.

First, the July US jobs report, which showed that the economy added 114,000 jobs last month, placing the US unemployment rate at its highest level since 2021, at 4.3 per cent. This brings the three-month moving average for the unemployment rate to at least 0.5 per cent above the three-month averages from the previous 12 months. According to a famous recession indicator known as the "Sahm rule" (devised by a former Fed economist Claudia Sahm), this points to an impending recession.

The second factor is a potential bursting of the tech bubble.