Wall Street looked set to plunge at the open on Monday as fears of the United States tipping into recession following weak economic data last week rippled through global markets.
Bourses from Asia to Europe took a beating and bond yields slipped as investors rushed to safe-haven assets and bet the U.S. Federal Reserve would now need to cut interest rates aggressively to spur growth.
The premarket selloff was brutal, with the so-called Magnificent Seven group of stocks - the main driver for the indexes hitting record highs earlier this year - set to lose a combined $1.3 trillion in market value.
Apple fell 10% after Berkshire Hathaway halved its stake in the iPhone maker, suggesting that billionaire investor Warren Buffett is growing wary about the broader U.S. economy or stock market valuations that have gotten too high.
Nvidia slumped 14.3% after reports of a delay in the launch of its upcoming artificial-intelligence chips due to design flaws. Microsoft and Alphabet slid nearly 6% each.
At 8:36 a.m. ET, Dow e-minis were down 1,257 points, or 3.15%, S&P 500 e-minis were down 247.5 points, or 4.6%, and Nasdaq 100 e-minis were down 1,155.25 points, or 6.23%.
A weak jobs report and shrinking manufacturing activity in the world's largest economy, coupled with dismal forecasts from the big U.S. technology firms, pushed the Nasdaq 100 and the Nasdaq Composite into a correction last week.
The disappointing jobs data also triggered what is known as the "Sahm Rule", seen by many as a historically accurate recession indicator.
Traders now see a 90.5% probability that the U.S. central bank will cut benchmark rates by 50 basis points in September, compared with an 11% chance seen last week, according to CME's FedWatch Tool.
Big Wall Street brokerages also revised their Fed rate projections for 2024 to show greater policy easing by the central bank.
"I don't think the Fed would go 50 basis points because at the same time it would imply that the Fed was wrong, that a recession is right around the corner and it would do more to increase investor tension than it would to calm nerves," said Sam Stovall, chief investment strategist at CFRA Research.
"If anything, I would say that the Fed might engage in an intra meeting, easing of 25 basis points to let the markets know that it is on top of the issue."
Yields on U.S. government bonds hit multi-month lows, with the 10-year note last at 3.6839%, while the two-year slipped to 3.6907%.
The CBOE Volatility index, also known as Wall Street's "fear gauge", breached its long-term average level of 20 points last week and was currently at 62.64, highest since April 2020.
Crypto-linked stocks fell after Bitcoin hit its lowest in five months. Coinbase Global was down 18.3%, while MicroStrategy and Riot Platforms were down 25.4% and 17.5%, respectively.
Pringles maker Kellanova soared 22.1% after a Reuters report said candy giant Mars was exploring a potential buyout of the company. - Reuters
