Market Turmoil as Economic Data Raises Fed Policy Concerns

On Thursday, major stock indices, including the S&P 500 and Nasdaq, saw significant declines following data indicating a rapid economic slowdown. Initial gains from Meta's strong quarterly results were overshadowed by manufacturing contraction. Experts express concerns about AI-related earnings and Federal Reserve policy strategie.

On Thursday, the S&P 500 plunged over 2% and the Nasdaq tumbled more than 3%, erasing early gains prompted by concerns that the economy could be decelerating too rapidly. This shift comes as the Federal Reserve persists with its restrictive monetary policy.

Initially, markets were buoyed by Meta Platforms (META.O), which soared 4.37% to $495.55, following a stellar quarterly report and positive forecast for Q3. However, AI-related earnings anxieties and the outlook for major tech stocks spooked investors.

A measure of manufacturing activity from the Institute for Supply Management (ISM) revealed an eight-month low in July, leading to broader market declines. The S&P 500 fell by 1.81% to 5,422.37, the Nasdaq Composite decreased by 2.80% to 17,106.33, and the Dow Jones Industrial Average dropped 1.62% to 40,180.91.

Chief Market Strategist Bill Strazzullo of Bell Curve Trading anticipates market consolidation in the near term but remains optimistic about future upward trends. CEO of Tolou Capital Management, Spencer Hakimian, attributes the selloff to cross-asset deleveraging while maintaining faith in strong 2025 capex guidance from tech firms.

Quincy Krosby, Chief Global Strategist at LPL Financial, notes a lowering ten-year Treasury yield, signaling economic growth concerns and doubts about the Fed's timing for policy adjustments. Tomorrow's payroll report is now highly anticipated as an indicator for future Fed actions.

(With inputs from agencies.)