India’s stock market was adversely affected as the Sensex dropped 3% to 78,580, and the NIFTY-50 fell 2% to 24,192. Hence, resulting in nearly ₹10 lakh crore in losses to investors within an hour of trading. The bearish foreign investors sold shares worth ₹3,310 in a single day. Let’s check all the factors related to Why is the stock market crashing.

Key Facts

• Firms with weak balance sheets face potential defaults.
• Recent surveys show dropping consumer confidence.
• Reduced spending and slow economic growth impacted stock markets.

Why is the stock market crashing?

Economic Worries

• Fears of a recession grew in the USA after July’s unemployment rate increased to 4.3%, which is the highest in almost the last three years. This increase triggered the Sahm Rule, a reliable recession indicator. Further, Goldman Sachs raised its recession probability for the coming year to 25%.

The Market Reactions

• Bearish investors sold off stocks and opted for bonds.
• The 10-year Treasury output was reduced to 3.74% answering Why is the stock market crashing!
• S&P 500 dropped by 6%,
• Dow Jones by 600 points, and
• NASDAQ by 2.4%.

Global Impact

• Japan’s Nikkei 225 crashed 7% in a day, entering the bear market with a 21% drop from its July peak. Other Asian markets were also affected. Taiwan’s Taiex fell 7.4%, South Korea’s Kospi decreased by 3.4%, and Hong Kong’s Hang Seng dropped 2.1%.

Stock Market Crashing Due to Interest Rates and Currency

• Weak US jobs data significantly changed rate cut expectations. Traders anticipate 70%+ chances of a 50-point Fed rate cut from 11.5% a week ago. Some experts predict a 100-point cut shortly.

Lower rates affected the US $, and the Japanese yen’s valuation of +10% against the US $ in three weeks dragged other currencies under pressure, answering Why is the stock market crashing. This shift led to the unwinding of yen-funded carry trades, further unsettling markets.

2024 Geopolitical Tensions

• Israel’s killing of a Hamas leader led Iran to vow revenge. Hence, the Middle East conflict, global trade tensions, and any trade disputes could further affect the markets.

Sector-Specific Impacts

• Intel shares fell 26% due to disappointing earnings and layoffs, while Amazon’s stock dropped 9% after a weak earnings report, cluing on stock market crashing. Apple stock gains couldn’t lift the market. Hence, the technology sector faced challenges.

Cryptocurrency Decline

• Bitcoin dropped over 10%, marking its worst week since the FTX collapse in 2022. It lost 20% from its March/2024 high of $73,798.

Bond and Commodity Markets

• US Treasury yields(a recession indicator) have decreased as investors seek safety. Industrial metals like copper have seen prices fall on recession fears.

Why is the stock market crashing — The Final Verdict

Overvalued railway sectors are experiencing increased pressure for revaluation. The rupee’s weakness poses challenges, and increasing servicing costs have affected Indian companies with high foreign debt!

Therefore, high-growth tech and overvalued stocks are risky. At the same time, healthcare, pharmaceutical, and defense stocks are stable and comparably an investment option. For daily finance news and stories, please like and subscribe to Financereview.org