Stock meltdown triggers ‘mad rush’ for Treasuries

A selloff in the riskier corners of the global market deepened, with stocks plunging and traders rushing to the safety of bonds as concerns about a slowdown in the world’s largest economy intensified.

From New York to London and Tokyo, equities got pummeled. Almost 98% of the shares in the S&P 500 got hit, with the index on track for its worst session in about two years. Losses were more pronounced in the high-flying tech space, with the Nasdaq 100 heading to its worst start to a month since 2002. A gauge of the “Magnificent Seven” megacaps like Nvidia Corp. and Apple Inc. plunged almost 10% at one point.

Stocks tumble on growth jitters

Just as stock markets were starting to celebrate signals from the Federal Reserve about a first rate cut, they were hit by a perfect storm: surprisingly weak economic data that’s brought back recession fears, underwhelming corporate earnings and poor seasonal trends. The repricing was so sharp that at one point the swap market assigned a 60% chance of an emergency rate reduction by the Fed over the coming week. While those odds subsequently ebbed to about 32%, the wager is a testament to investor anxiety.

“The economy is not in crisis, at least not yet,” said Callie Cox at Ritholtz Wealth Management. “But it’s fair to say we’re in the danger zone. The Fed is in danger of losing the plot here if they don’t better acknowledge cracks in the job market. Nothing is broken yet, but it’s breaking and the Fed risks slipping behind the curve.”

The wave of selling hit a fever pitch in Japan as traders rushed to unwind popular carry trades, powering a 3% surge in the yen and causing the Topix stock index to shed 12% and close the day with the biggest three-day drop in data stretching back to 1959. The rout wiped out $15 billion of SoftBank Group Corp.’s value on Monday.

Both the S&P 500 and the Nasdaq 100 fell 3%. Nvidia plunged 6.5% on a report its upcoming artificial-intelligence chips will be delayed. News that Warren Buffett’s Berkshire Hathaway slashed its stake in Apple further drove risk-off sentiment. Wall Street’s “fear gauge” — the VIX — hit the highest since 2020.

Treasury 10-year yields dropped two basis points to 3.77%. The dollar fell as the prospect of Fed easing dimmed the greenback’s appeal. Cryptocurrencies reeled from a bout of risk aversion in global markets, at one point sending Bitcoin down more than 16%. Commodities from copper and gold to oil plunged.