Wall Street shakes on concerns about U.S. economic slowdown

NEW YORK (AP) — Nearly all of Wall Street’s stocks were struggling in midday trading Monday as growing concerns about a slowing U.S. economy sparked another wave of selling in global financial markets.

At midday, the S&P 500 fell 2.4%; the Dow Jones Industrial Average fell 2.2% and the Nasdaq Composite fell 2.8%.

The decline was the latest in a global sell-off that began last week, starting with Japan’s Nikkei 225, which plunged 12.4% on Monday, its worst day since Black Monday in 1987.

It was the first chance for Tokyo traders to react to a report on Friday showing U.S. employers slowed hiring last month at a much slower pace than economists had expected. The latest data on the U.S. economy came in weaker than expected, all of which stoked concerns that the Federal Reserve is putting too much pressure on the economy to hit the brakes by raising interest rates to tame inflation.

Even gold, known for providing certainty in turbulent times, fell 1%.

Now traders are wondering whether the losses are so severe that the Fed must hold an emergency meeting to cut interest rates before its next decision scheduled for Sept. 18.

“The Fed can come on a white horse and save the world with big rate cuts, but the case for cutting rates between meetings looks weak,” said Brian Jacobsen, chief economist at Annex Wealth Management. “Those are usually reserved for emergencies, like the coronavirus, and 4.3% unemployment doesn’t really look like an emergency.”

The U.S. economy continues to grow, and a recession is far from certain. The Fed was well aware that it was walking a tightrope when it began sharply raising interest rates in March 2022: being too aggressive would stifle the economy, but being too dovish would provide more oxygen for inflation and hurt everyone.

Goldman Sachs economist David Mericle sees a higher chance of a recession in the next 12 months after Friday’s jobs report. But he still puts the odds at just 25%, down from 15%, in part because “the data generally look good” and he “doesn’t see major financial imbalances.”