Nasdaq and S&P suffer biggest drop in two years: AI company records biggest loss of market value in its history

Stock markets around the world continued to fall on Monday amid fears the U.S. economy could be headed for a recession, while Japan suffered its worst sell-off since Black Monday in 1987.

Experts at investment bank Goldman Sachs said they now believed there was a staggering 25 percent chance of a US recession, up ten percent from their previous estimate of 15 percent, while JP Morgan put the chances of a recession at 50 percent.

U.S. stock index futures fell on Monday, with those linked to the Nasdaq down nearly 4 percent, but traders are now increasing bets that the Federal Reserve will announce an emergency interest rate cut in response to the global stock market collapse and to prevent a major recession.

Wells Fargo and Goldman Sachs fell more than 5 percent in the first hour of trading.

Bank of America fell 4.5 percent and JP Morgan Chase was trading about 3 percent lower Monday morning.

Downdetector, which monitors when apps and websites are down, reported problems with several of the most popular trading platforms.

Those affected include Robinhood, E-Trade, Fidelity, Ameritrade and Charles Schwab.

The group, made up of Nvidia, Tesla, Amazon, Meta, Alphabet (Google), Microsoft and Apple, opened with a combined drop of 9 percent, according to Bloomberg analysis.

This is the worst daily drop for the companies since market data began grouping them together in 2015.

Nvidia fell a whopping 14 percent in early trading in New York.

The drop wiped out about $360 billion in market value, making it potentially the biggest one-day drop for a company in stock market history.

Apple fell 8 percent after Warren Buffett’s Berkshire Hathaway halved its stake in the tech giant.

The S&P 500 opened down 195.42 points, or 3.66 percent, at 5,151.14.

The technology-heavy Nasdaq fell 1,063.63 points, or 6.34 percent, to 15,712.53 at the opening of trading.

This means that both have fallen the most in almost two years.

The Dow Jones Industrial Average fell 681.07 points, or 1.71 percent, at the opening to 39,056.19.

All of this will impact Americans’ retirement savings, with 401(k)s heavily invested in major indexes.

Wall Street’s most-watched gauge of investor anxiety posted its biggest intraday jump ever on Monday as U.S. stock futures fell on growing fears the United States may be entering a recession.

The CBOE Volatility Index rose to a high of 65.73, up about 42 points from its Friday close, as Wall Street looked set to continue the global equity rout that saw Japanese stocks at one point surpass their 1987 “Black Monday” loss.

The VIX was last up 34 points at 57.15, its highest level since March 2020.

“It looks like a liquidity crisis… this is very, very unusual,” said Joe Tigay, portfolio manager at Rational Equity Armor Fund.

A circuit breaker is a temporary pause in trading if stock market indices fall too far.

If the S&P 500 falls 7 percent at the close of the last trading day, there will be a 15-minute pause in trading.

If there is a 13% drop before 3:25 p.m., there will be a second 15-minute pause.

If the index falls by 20 percent, the markets will close for that day.

Circuit breakers are common for individual stocks, but extremely rare for major indexes.

The last time we saw indices like the S&P 500 was during the early stages of the pandemic.

Nvidia shares fell 14 percent in premarket trading at 9:30 a.m. New York time.

That will wipe out nearly $360 billion of market cap from AI-favored stocks.

That would be the biggest destruction of market value in history.

Shares have soared this year amid enthusiasm for artificial intelligence.

S&P 500 futures are down 3.1 percent and Nasdaq futures are down 4.7 percent.

Investors are fleeing the big tech companies that had until recently been driving the US market higher: Apple fell more than 7% and Meta dropped 6% in premarket trading. Chipmaker Nvidia plunged 12.5%.

Losses on the Magnificent Seven stocks would wipe nearly $1 trillion off the combined market value of the companies.

After powering gains on Wall Street for more than a year, big tech stocks have come under pressure in recent weeks also on signs that the payoff from heavy investments in AI would take longer than some investors had initially expected.

Shares of Amazon, Microsoft and Alphabet, the three largest cloud computing providers, fell as their earnings reports dashed big bets on massive investments in artificial intelligence that quickly translated into growth.

A leading economist has issued a stark warning about the US economy, criticising the Federal Reserve for a “policy mistake” that could tip the country into recession.

Mohamed El-Erian, chief economic adviser at Allianz, said on Sunday he fears the economy could be in crisis following a grim unemployment report last week.

He blames the Federal Reserve for keeping its main interest rate at the highest level in two decades from 2022 in its quest to quell inflation.