FX.co ★ U.S. Stocks May Extend Sell-Off Amid Overseas Weakness

The futures for major U.S. indices indicate a sharply lower opening on Monday, suggesting that stocks will likely extend the sell-off seen in the past two sessions.

A significant overseas sell-off, highlighted by Japan's Nikkei 225 Index experiencing its largest slump since "Black Monday" in October 1987, appears set to impact Wall Street.

The disappointing jobs report from last Friday, raising fears of an impending U.S. recession, has fueled significant weakness in global markets.

Shares of Nvidia (NVDA), a leading player in the artificial intelligence sector, are down 13.9 percent in pre-market trading. This decline comes as part of a broader unwinding of the AI trade that recently propelled markets to record highs.

Apple (AAPL) is also seeing a sharp decline, dropping 9.9 percent in pre-market trading after Warren Buffett's Berkshire Hathaway disclosed selling nearly half of its stake in the tech giant.

Stocks saw a sharp decline during trading last Friday, continuing the steep losses from Thursday's session. The tech-heavy Nasdaq hit its lowest closing level in two months, with the S&P 500 also closing at a near two-month low.

Despite rebounding off the lows of the session, the major averages ended the day firmly in the negative. The Nasdaq fell 417.98 points or 2.4 percent to 16,776.16, the S&P 500 dropped 100.12 points or 1.8 percent to 5,346.56, and the Dow plunged 610.71 points or 1.5 percent to 39,737.26.

Reflecting the sell-off, the major averages also declined sharply over the week. The Nasdaq plummeted by 3.4 percent, while the S&P 500 and the Dow each decreased by 2.1 percent.

Concerns about the U.S. economic outlook continued to weigh on Wall Street, following a report from the Labor Department showing a lower-than-expected increase in employment for July.

The report revealed that non-farm payroll employment rose by 114,000 in July, following a downward revision to 179,000 jobs in June. Economists had forecast an increase of 175,000 jobs, compared to the initially reported 206,000 jobs for June.

The Labor Department also reported an unemployment rate increase to 4.3 percent in July from 4.1 percent in June. Economists had expected the unemployment rate to remain steady.

This unexpected rise brings the unemployment rate to its highest level since October 2021, when it hit 4.5 percent.

Although weaker economic data has previously led to positive market reactions, with traders anticipating the Federal Reserve would lower interest rates, there is growing concern that the Fed's delay may result in a recession.

"The economy and stock market have shown resilience due to low unemployment and steady consumer spending. However, if this changes, the Fed may have made a critical error by maintaining high rates for too long," commented Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance.

Negative sentiment has also been driven by recent earnings news. Intel (INTC) dropped 26.1 percent after reporting weaker-than-expected second-quarter results.

Amazon (AMZN) fell by 8.8 percent following disappointing second-quarter revenues and a lackluster outlook for the current quarter.

Conversely, Apple (AAPL) saw gains after reporting fiscal third-quarter results that exceeded analyst expectations on both revenues and earnings.

Semiconductor stocks suffered significantly, with the Philadelphia Semiconductor Index falling by 5.2 percent to a three-month closing low, due to Intel's disappointing results.

Oil service stocks also showed significant weakness, with the Philadelphia Oil Service Index dropping 5.2 percent.

Retail stocks were notably affected by Amazon's decline, with the Dow Jones U.S. Retail Index falling by 4.2 percent.

Broad-based selling pressure also impacted computer hardware, airline, and financial stocks.

**Commodities and Currency Markets**

Crude oil futures are down $1.31 to $72.21 per barrel after a previous fall of $2.79, closing at $73.52 per barrel on Friday. Gold futures have dropped $63.90 to $2,405.90 per ounce after a previous decline of $11 to $2,469.80 per ounce.

In currency markets, the U.S. dollar is trading at 142.10 yen, down from 146.53 yen at the close of New York trading on Friday. Against the euro, the dollar stands at $1.0975, compared to $1.0911 last Friday.

**Asia**

Asian shares tumbled on Monday amidst fears of a potential U.S. recession and rising concerns over escalating conflict in the Middle East.**Asian Markets**

China's yuan surged to a seven-month high, while the Japanese yen reached its strongest levels against the dollar since January. This occurred following the U.S. report of significantly lower-than-expected job creation in July, coupled with an unexpected rise in the unemployment rate to its highest level in nearly three years. These developments stoked fears that the labor market was deteriorating, potentially exposing the economy to a recession.

Gold prices showed volatility in Asian trading, whereas oil extended losses from its seven-month low despite escalating tensions in the Middle East. Reports indicated that the Benjamin Netanyahu-led government might consider a pre-emptive strike on Iran to prevent an attack on Israeli soil.

Chinese markets closed lower as disappointing global cues overshadowed data indicating accelerated growth in the country's services sector for July. The Caixin/S&P Global services purchasing managers' index (PMI) rose to 52.1 from 51.2 in June, marking the 19th consecutive month of expansion.

China's Shanghai Composite Index fell by 1.5 percent to 2,860.70, while Hong Kong's Hang Seng Index also dropped by 1.5 percent to 16,698.36.

Japanese markets faced severe selling pressure amid concerns that the U.S. economy might be in a worse state than anticipated. The Nikkei 225 Index plummeted 12.4 percent to 31,458.42, marking its most significant decline since "Black Monday" in October 1987, when it fell 14.9 percent. The broader Topix Index decreased by 12.2 percent to 2,227.15.

Tech stocks took a significant hit due to an unwinding of the artificial intelligence trade, with Screen Holdings, Advantest, Tokyo Electron, and SoftBank Group falling between 13-19 percent.

South Korean stocks fell for the second consecutive session amid a tech sector rout. The Kospi dropped by 8.8 percent to 2,441.55, triggering trading curbs such as sidecars and circuit breakers on the exchange for the first time since 2020. Chip giants Samsung Electronics and SK Hynix each fell by roughly 10 percent.

Australian markets experienced their worst two-day decline since the onset of the pandemic. The benchmark S&P/ASX 200 Index decreased by 3.7 percent to 7,649.60, driven by fears of a hard landing for the U.S. economy. The broader All Ordinaries Index dropped by 3.8 percent to 7,859.40, with tech stocks and financials leading the losses.

In New Zealand, the benchmark S&P/NZX-50 Index ended 1.5 percent lower at 12,264.49.

**Europe**

European stocks continued their downward trend on Monday, extending losses from the previous session amid fears that the U.S. economy might be heading toward a recession. Concerns about escalating tensions in the Middle East also weighed on the markets, with reports suggesting that the Benjamin Netanyahu-led government could authorize a pre-emptive strike on Iran to thwart potential attacks on Israeli soil.

Economic data revealed that the eurozone economy stalled in July as demand for goods and services declined. The HCOB composite PMI output index dropped to a five-month low of 50.2 from 50.9 in June, and the services PMI business activity index fell to 51.9 from 52.8 a month earlier.

Conversely, the U.K. service sector showed some growth acceleration in July, with demand increasing at the fastest rate in over a year. The S&P Global Services PMI rose to 52.5 in July from 52.1 in the previous month, slightly higher than the flash score of 52.4.

Eurozone Sentix Investor Confidence fell sharply in August, dropping from -7.3 to -13.8, its lowest level since January.

The German DAX Index declined by 3.3 percent, the U.K.'s FTSE 100 Index fell by 2.9 percent, and the French CAC 40 Index decreased by 2.6 percent.

On the corporate front, Galderma AG surged by 7.2 percent after L'Oreal announced the acquisition of a 10 percent stake in the Swiss dermatology company for an undisclosed amount. Chip equipment makers ASM International and ASML declined by 3-4 percent. Germany's Infineon Technologies remained relatively unchanged, reversing early gains after reports that Nvidia would delay its next-generation artificial intelligence chips by at least three months.

Aurubis plunged by 7.8 percent after the copper producer reported third-quarter earnings before tax (EBT) that fell short of expectations. Meanwhile, OCI Global jumped by 10 percent following Woodside Energy's agreement to acquire the Dutch chemicals maker's clean ammonia project in Texas for $2.35 billion.

British engineering firm Senior slipped by 5.5 percent despite reporting a 10 percent increase in first-half profit. Ship broker Clarkson fell by 8.5 percent after reporting lower sales and profit for the first half of the year.

**U.S. Economic News**

The Institute for Supply Management is set to release its report on the service sector activity for July at 10 am ET. The services PMI is expected to increase to 51.0 in July from 48.8 in June, with a reading above 50 indicating growth.

San Francisco Federal Reserve President Mary Daly is scheduled to discuss monetary policy and economic trends during a moderated conversation hosted in partnership with the Hawaii Executive Collaborative at 5 pm ET.