Japan’s benchmark stock index rises nearly 11% a day after massive sell-off that rattled Wall Street

NEW YORK — Japan’s benchmark Nikkei 225 index soared more than 10% on Tuesday morning, a day after sending markets in Europe and Wall Street tumbling. Other markets in Asia appeared to have stabilized somewhat after the rollercoaster ride that started the week.

Scary Monday started with a dive into the outdoors reminiscent of 1987 The crisis that swept the world and hit Wall Street with more pronounced losses, As fears grew about a slowing down US economy.

The Nikkei gained nearly 11% on Tuesday morning but then fell, trading 8.7% higher at 34,211.83 as investors shopped for bargains following the previous day’s 12.4% rout.

On Monday, the S&OP 500 fell 3% on its worst day in almost two years. The Dow Jones Industrial Average reeled 1,033 points, or 2.6%, while the Nasdaq composite fell 3.4%, as Apple, Nvidia and other big technology companies that used to be the stars of the stock market continued to wither.

The declines were the latest in a global sell-off that began last week and was the first chance for Tokyo traders to react to Friday’s report showing that the U.S. employers slowed down their hiring last month by much more than economists expected. This was the last data on the US economy released weaker than expectedand all this raised the fear of Federal Reserve put too much pressure on the US economy for too long through interest rate hoping to suffocating inflation.

Professional investors warned that some technical factors may be amplifying action in the markets and that the declines may be exaggerated, but the losses were still overwhelming. South Korea’s Kospi index fell 8.8% and bitcoin fell below $54,000 from more than $61,000 on Friday.

Even gold, which has a reputation for providing security in tumultuous times, fell about 1%.

Elsewhere in Asia on Tuesday, Hong Kong’s Hang Seng Index rose 1.1% to 16,876.98 and the Kospi jumped 3.5% to 2,526.20. Taiwan’s Taiex rose 1.2% and in Australia, the S&P/ASX 200 rose 0.3% to 7,675.90.

The Shanghai Composite index, largely ignored by the previous day’s drama, rose 0.2% to 2,865.06.

Monday’s collapses reflected fears that the damage to the economy from prolonged high interest rates has been so severe that the Federal Reserve will have to cut rates at an emergency meeting ahead of its next decision scheduled for September 18. , which closely tracks expectations for the Fed, briefly fell below 3.70% in the morning, 3.88% on Friday and 5% in April. It later recovered and fell to 3.89%.

“The Fed could ride a white horse to save the day with a big rate cut, but the case for a cut between meetings seems weak,” said Brian Jacobsen, chief economist at Annex Wealth Management. “They are usually reserved for emergencies, like COVID, and a 4.3% unemployment rate doesn’t really seem like an emergency.”

Clear, the US economy is still growing, the US stock market is still up for the year and a recession is far from a certainty. The Fed was clear about the tightrope it began walking when it began sharply raising rates in March 2022: being too aggressive would suffocate the economy, but being too soft would give more oxygen to inflation and hurt everyone.

Some of Wall Street’s recent declines may simply be the air coming out of a stock market that has reached dozens of all-time highs this year, in part due to a frenzy around artificial intelligence technology. Critics have been claiming for some time that the stock market has looked expensive after prices rose faster than corporate profits.

“Markets tend to go up like they’re climbing stairs and down like they’re falling out of a window,” according to JJ Kinahan, CEO of IG North America. He attributes many of the recent concerns to the euphoria surrounding the decline of AI, with increasing pressure on companies to show how AI is turning profits and a “market ahead of itself.”

The only way for stocks to appear cheaper is for prices to fall or profits to rise. Expectations are still high for the latter, with growth for S&P500’s profits last quarter appear to be the strongest since 2021.

Professional investors also pointed to the Bank of Japan’s decision last week to raise your key interest rate to near zero. This measure helps increase the value of the Japanese yen, but it also led traders to abandon businesses in which they borrowed money at virtually no cost in Japan and invested it elsewhere in the world.

Treasury yields also pared their losses on Monday after a report said growth in U.S. services companies was slightly stronger than expected. The growth was led by arts, entertainment and recreation businesses, along with accommodation and food services, according to the Institute for Supply Management.

Still, shares of companies whose profits are more closely tied to the strength of the economy have suffered steep losses due to fears of a slowdown. Small companies in the Russell 2000 index fell 3.3%, wiping out what had been a recovery in this and other depressed areas of the market.

Making matters worse for Wall Street, Big Tech stocks fell as the market’s most popular trade for much of this year continued to crumble. Apple, Nvidia and a handful of other Big Tech stocks known as “ Magnificent Seven ” boosted the S&P500 to record after record this year, even as high interest rates weigh on much of the rest of the stock market.

But Big Tech’s momentum swung last month on concerns that investors had driven their prices too high and that expectations for future growth were becoming too difficult to meet. A set of underwhelming earnings reports that began with earnings updates Tesla It is Alphabet pessimism increased and the declines accelerated.

Apple fell 4.8% on Monday after Warren Buffett’s Berkshire Hathaway revealed it had reduced its shareholding at the iPhone maker.

Nvidia, the chip company that has become the poster child for Wall Street’s AI bonanza, fell even more, 6.4%. Analysts cut their profit forecasts for the company over the weekend after a report from The Information said Nvidia’s new AI chip is delayed. The recent sale cut Nvidia’s gain for the year to nearly 103% from 170% in mid-June.

Another Big Tech titan, Alphabet, fell 4.4% after a US judge ruled that Google’s search engine was illegally exploiting your domain to crush competition and stifle innovation.

Altogether, the S&OP 500 fell 160.23 points to 5,186.33. The Dow Jones sank 1,033.99 to 38,703.27 and the Nasdaq index fell 576.08 to 16,200.08.

Concerns outside of corporate profits, interest rates and the economy also weigh on the market. O Israel-Hamas War it may be getting worse, which, in addition to its human impact, could cause sharp fluctuations in the price of oil. This is raising broader concerns about possible access points around the world, while upcoming elections in the USA could mess things up even more.

Wall Street has been concerned about how policies coming out of November could impact markets, but sharp swings in stock prices could affect the elections themselves.

The threat of a recession will likely put Vice President Kamala Harris on the defensive. But slower growth could also reduce inflation further and force former President Donald Trump to shift from his current focus on higher prices to outlining ways to revive the economy.

“It’s all about jobs,” said Quincy Krosby, chief global strategist at LPL Financial. Jobs drive U.S. consumer spending, which in turn makes up the majority of the U.S. economy.

“When we get to Election Day, the unemployment rate will be extremely important.”

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AP Business Writers Matt Ott, Christopher Rugaber and Damian J. Troise contributed.