Wall Street reacts to global market sell-off
(This is CNBC Pro’s live coverage of Monday’s Wall Street chatter as global markets sell off.) Stock markets around the world are selling off to start the week, as investors fear the U.S. could be headed into a recession amid a spate of softening economic data. Japan’s Nikkei 225 had its biggest one-day drop since 1987 overnight, losing 12.4% . The Korean Kospi index also shed 8.7%. In Europe , the Stoxx 600 index has shed more than 2%. U.S. stocks also fell sharply on Monday. Despite the sharp losses, several investors and strategists advised against panicking at this point. That said, JPMorgan’s top charts analyst thinks this could be the ” start of something bigger .” Follow along for the latest chatter and reaction to the sell-off. All times ET. 5:10 p.m.: Ed Yardeni: ‘Market will stabilize’ once unwind in the yen carry trade ends The market’s recent sell-off will be quick to recover once the massive unwind in the Japanese yen “carry trade” ends, according to Yardeni Research president Ed Yardeni. “The issue here, in my opinion, is the carry trade,” Yardeni said on CNBC’s “Closing Bell.” “A lot of what’s going on now is, in fact, related to these carry trades and I think once they wash out — and I think it’ll happen pretty quickly here — I think the market will stabilize and we’ll be back looking at the fundamentals of the economy.” “And notwithstanding Friday’s numbers, I think the economy is fine, the labor market’s fine,” he continued, referring to July’s disappointing payrolls data. Carry trades refer to the process of investors borrowing in a currency with low interest rates, like Japan’s yen, and then reinvesting the proceeds in assets with a higher rate of return. Many investors have cited the rising yen, along with recent disappointing U.S. manufacturing and jobs data, among the primary reasons for the sell-off in U.S. stocks. — Pia Singh 3:35 p.m.: Raymond James CIO remains bullish on tech amid recent pessimism Monday’s volatility is a green light for tech buyers, according to Raymond James’ chief investment officer Larry Adam. “We believe we are still in the early stages of this bull market (1.8 years) versus history where bull markets tend to last 5.5 years,” Adam said, adding that he views the recent pullbacks as a buying opportunity. He noted that the broader market typically sees three to four 5% pullbacks in a year, and that 2024 has seen only two. Adam reiterated his year-end target of 5,400 for the S & P 500 and said he continues to favor the tech sector, particularly the mega-cap tech companies. “Because of the pullback, valuations have gotten much more attractive, with the big cap tech stocks trading at the bottom end of the range versus the S & P 500, which tends to be an area of opportunity for the sector,” Adam said on Monday, noting the strong earnings growth and cash hoard of the group. “We believe that the AI trend is still in its early stages. In fact, as the theme matures, it should extend beyond the early beneficiaries,” he added. — Pia Singh 3:20 p.m.: Investor ‘stampede’ has created buying opportunities, says Macquarie The market sell-off Monday was akin to a “stampede” that investors may want to avoid, according to Macquarie. “According to Britannica, a stampede is ‘an occurrence in which a large group of frightened animals or people run together in a wild and uncontrolled way to escape from something,'” said Viktor Shvets, the firm’s head of global and Asia Pacific strategy. In this case, the “something” was actually a number of events, including the perception that the Federal Reserve is behind the curve in cutting interest rates, concerns over a tech bubble and the potential unwind of the Yen carry trade, he wrote in a note Monday. However, Shvets believes the U.S. can avoid a recession and that tech valuations are nowhere near bubble territory. Meanwhile, the U.S. dollar-yen exchange rates are only back to those of late 2023 and the fundamental reasons for carry trade are still intact, he added. “Although stampedes are inherently unpredictable, we view it is closer to irrational, thus creating buying rather than selling opportunities,” he said. — Michelle Fox 1:45 p.m.: Investors should ’embrace this volatility,’ says KKM Financial’s Jeff Kilburg Against the backdrop of a global equity sell-off, the Cboe Volatility Index — or VIX, a popular gauge of volatility in the market — spiked on Monday. But Jeff Kilburg, founder and CEO of KKM Financial, views this as a buying opportunity for investors. “I want to take this and embrace this volatility. We are looking to reposition,” he told CNBC’s ” The Exchange ” on Monday. “The VIX — you have to use it to your advantage to mitigate risk, to find risk and also allocate towards risk when other people are fearful.” One opportunity Kilburg is eyeing is Tesla, which has been very volatile recently as the laggard of the Magnificent Seven cohort. But more generally, the investor sees a buying opportunity whenever there’s a “swoosh” down in any of these seven names. Kilburg added that volatility should remain elevated but still manageable going forward. — Lisa Kailai Han 1:26 p.m.: Monday’s sell-off is a buying opportunity, Nationwide investment research chief says There’s a silver lining in Monday’s sell-off for long-term investors, according to Nationwide chief of investment research Mark Hackett. “This surge in volatility seems like an overreaction driven by emotions and the absence of share repurchases, swinging the pendulum aggressively to the downside,” Hackett said in a note to clients. “For disciplined investors, today’s volatility presents a buying opportunity … Patience and a measured approach are crucial, as there are no signs of fundamental issues in the market.” Hackett advised investors to pick up shares of undervalued groups in the market, like small-cap stocks, value names and international stocks. The roughly 3% drop in the broader market is not unusual during periods of a correction, and these drops have historically been followed by a recovery, he said. — Pia Singh 1:21 p.m.: Possible that markets have overshot to the downside, Ned Davis Research says Ned Davis Research’s Joe Kalish thinks markets may be overreacting to some of the recent data that has sparked the global sell-off. “Although the BLS said, ‘Hurricane Beryl had no discernible effect’ on the national data, we found the underlying data was riddled with weather related impacts, thereby overstating the widespread weakness in the report,” Kalish wrote. “Yet, the market is pricing 125 bp of rate cuts this year and a fed funds target range of 3.00% to 3.25% by the second half of next year,” he added. “Although we may get there, that is not our call at this time.” — Fred Imbert 11:40 a.m.: Wolfe Research’s Chris Senyek is still a believer in the AI theme Despite a mixed tech earnings season and the global equities sell-off, Wolfe Research’s chief investment strategist Chris Senyek remains bullish on the artificial intelligence theme. “I’m still a big believer in the AI theme and the AI spend I don’t think there’s really any big signs of that slowing down,” he said Monday in a CNBC “Money Movers” interview. Senyek noted that August is traditionally one of the seasonally weakest periods of time for the market, and chalked that up to some of the volatility currently plaguing investors. “Our broadening view is that the Fed’s going to cut, we’re going to have a soft landing with the economy slowing a little bit,” he added. — Lisa Kailai Han 11:32 a.m.: S & P 500 could be due for more downside, says JPMorgan’s Jason Hunter JPMorgan head of technical strategy Jason Hunter said the S & P 500 could see further declines ahead, noting that the market sell-off could be “the start of something bigger.” “We think there’s enough evidence in the lower frequency bigger picture charts and cross markets setup that suggests yes, this could be it,” Hunter told CNBC’s ” Money Movers ” on Monday. “There’s two key levels, the 5,000 to 5,100 area, and then below that you get down to 4,600 to 4,800, the second one, I think if you do get down to that it’ll come in the September [to] October period when the seasonals are fully negative, and that’s the big one,” he added. — Brian Evans 11:18 a.m.: Odds of the Fed nailing a soft landing are slimming, says Bolvin Wealth Management While the Federal Reserve could still achieve a soft landing for the U.S. economy, the latest market sell-off is making doing so more difficult, according to Bolvin Wealth Management president Gina Bolvin. “The Fed can still stick this landing, but it is getting more difficult,” Bolvin wrote on Monday. “While odds of a recession are rising, I don’t think we will see one this year because earnings are growing double digits.” She noted that the weaker-than-expected labor market data from Friday was simply one measure in a more broad set of economic data, and that fundamentals remain intact. — Brian Evans 11:03 a.m.: The Fed ‘got this wrong,’ says Moody’s Analytics chief economist Moody’s Analytics chief economist Mark Zandi joined CNBC’s ” Squawk on the Street ” on Monday morning to share his thoughts around the global equity sell-off. The economist believes the Federal Reserve should have been cutting rates months ago. While he believes a 50-basis point rate cut would be more appropriate in September, the U.S. central bank is likely to only cut by 25 basis points. He also doesn’t see an emergency intermediate rate cut in the picture. The Fed “misjudged, they got this wrong,” Zandi said. “They have to get moving here and they have to get rates back down to something that’s more consistent with their long run equilibrium.” The economist added that the odds of a recession have gone up, especially with the labor market growing weaker and if consumer spending takes a hit. “For months, going back a year, the job market is looking increasingly fragile under the hood,” he added. “Everything’s saying this job market is weakening, and to a point where we could have a real problem if the Fed doesn’t take the pressure off.” — Lisa Kailai Han 11:01 a.m.: Market sell-off is ‘pretty normal’ and an opportunity for longer-term investors, BMO’s Brian Belski says BMO Capital Markets chief investment strategist Brian Belski hammered down on his bullish market outlook. “This is pretty normal, and it’s part of a broader trend…that the markets in general are heading into normalization,” Belski said, keeping his S & P 500 year-end target of 5,600. “We’ve been waiting for this.” Belski said small to mid-cap stocks are the “best-positioned assets” over the next decade from a fundamental perspective. He added that the market’s strong rotation away from mega cap tech is a buying opportunity for stocks like Amazon, Apple, Google and Microsoft — names investors must have exposure to. “You’ve been provided a gift here…you absolutely, positively have to have exposure to these names,” Belski said, referring to the big tech group. Belski also advised investors to stay away from consumer staples and utilities, calling those trades a short-term and reactionary move as the sectors are too expensive. — Pia Singh 10:41 a.m.: There’s more to the sell-off than is being talked about, RBC says Yes, stocks around the world fell sharply on fears the U.S. economy may be slowing. But, RBC head of global equity strategy Lori Calvasina, thinks there’s more to the sell-off than is being discussed. The recently disappointing U.S. data that sparked this decline “occurred against the backdrop of extremely stretched positioning in US equity futures broadly and in S & P 500 and Nasdaq futures contracts specifically,” Calvasina wrote. She also pointed to seasonal factors. “Seasonality has been poor for the S & P 500 in the August – October time frame for the past five years,” Calvasina noted. And, “the S & P 500 has been positively correlated with Trump’s betting market odds, which have been deteriorating and now lag Harris.” Overall, Calvasina thinks this could be a garden-variety pullback for the market. “We pointed out that the overall tone from companies in the current reporting season, as well as commentary on the macro backdrop and labor dynamics, simply don’t sync up with the idea that the US is tipping into recession,” she said. — Fred Imbert 10:09 a.m.: Market’s ‘next threat’ are the investors who were slow to get out, Nomura says There’s room for further unwinding of long positions in U.S. equities, according to Nomura Holdings. The “next threat to the market comes from speculators who were slow to get out,” analyst Yoshitaka Suda said in a note, adding that U.S. equity markets have “abandoned the factor rotation they had been engaged in and are instead heading straightforwardly downward out of concern over the economic outlook.” Instead of embracing the decline in market interest rates, Suda said investors seem to be dragging the market down out of fear of “what lies behind the decline in interest rates” — a potential economic slowdown. The analyst expects investors to continue lowering their long exposure to U.S. stocks for as long as the S & P 500 stays below the 5,500 level. Macro hedge funds are also mounting an attack on Japanese equities, which are also continuing their steep sell-off on Monday, he noted. — Pia Singh 8:24 a.m.: Bitcoin’s narrative as a store of value is getting ‘decimated,’ says co-founder of Tezos blockchain Alongside global stocks, bitcoin plunged more than 13% on Monday. At one point, the cryptocurrency dropped below the $50,000 level for the first time since February. Kathleen Breitman, the co-founder of the Tezos blockchain, told CNBC’s ” Squawk Box ” on Monday morning that bitcoin’s narrative as a store of value is “being decimated as we speak.” However, Breitman added that bitcoin still has a utility in its usefulness for transaction. “I think that it addresses a fundamental problem and a technical problem that isn’t necessarily a panacea for everyone. I think the store of value meme is like a meme, just like a lot of other crypto culture that sometimes makes sense and other times doesn’t,” she added. — Lisa Kailai Han 7:45 a.m.: Wharton’s Siegel says the Fed should move forward with two 75-basis point rate cuts Jeremy Siegel, professor of finance at Wharton, told CNBC’s ” Squawk Box ” on Monday that the Federal Reserve needs to cut rates twice by 75 basis points after the release of disappointing economic data and a global market sell-off. Siegel underscored that the U.S. central bank has now “overshot” both its employment and inflation rate targets. On the other hand, the Fed hasn’t moved its fed funds rate, which “makes absolutely no sense whatsoever,” Siegel added. To be sure, Siegel noted it’s highly unlikely the Fed does go through with two 75-basis point cuts. At this point, he also believes that the “market knows so much better than the Fed.” “[The Fed] has got to respond. … They’re basically at the target, and there’s a lag in monetary policy,” Siegel added. “If they’re going to be as slow on the way down as they were on the way up — which by the way, was the worst policy error in 50 years — then we’re not in for a good time with this economy.” — Lisa Kailai Han 7:10 a.m.: Fundstrat’s Tom Lee says watch this key indicator as market sells off With a global sell-off brewing, Fundstrat Global Advisors’ Tom Lee thinks that investors should be paying a close eye on the Cboe Volatility Index (VIX) . The Vix is a popular fear gauge on Wall Street. It soared above 50 on Monday, reaching levels not seen since 2020. But as volatility subsides, Lee thinks the market could quickly rebound once its current elevated volatility levels fall. .VIX 5Y mountain VIX 5-yr chart “Declines like that are generally symmetric, but you have to watch the VIX and when the VIX peaks and starts to roll over and fall down, the recovery can be just as quick,” he said during a CNBC “Squawk Box” interview. “We know markets are nervous and they have to unwind. But it’s not yet a bad time to be thinking that there is a big opportunity on the other side because once the VIX starts to calm down and markets have already corrected, we know that there’s opportunity.” — Lisa Kailai Han 7:02 a.m.: How long sell-offs typically last Bad news: The current market sell-off may have further to go. Data compiled by HSBC shows sell-offs for the S & P 500 typically last one month, with the benchmark losing 10% on average. “In this Sell-Off phase there are relatively few places to hide. [Developed market] defensives, the FTSE 100 and the S & P 500 generally hold up a little better on average. Yet all three still typically fall on an absolute basis in a Sell-Off environment,” wrote strategist Duncan Toms. To be sure, this could “present an opportunity to scale up risk exposure, at least tactically – but not yet,” Toms added. The S & P 500 entered Monday’s session down more than 5% from an all-time high reached last month. .SPX mountain 2024-07-16 SPX since July 16 — Fred Imbert 6:42 a.m.: G Squared Private Wealth’s Victoria Green: ‘Panic is never a smart investment strategy’ It might be easy to turn bearish after a historic sell-off, but Victoria Greene thinks investors should take a step back. “Some of this is so much panic after we were so quiet. All of a sudden we flipped into panic mode and panic is never a smart investment strategy,” Greene, founding partner and chief investment officer at G Squared Private Wealth, told CNBC’s ” Worldwide Exchange ” on Monday. “Take a deep breath this morning. It’s probably not the end of the world.” Still, she acknowledged: “It’s probably not all horrible and it’s probably not all good, but it’s hurting.” Nimrit Kang agreed with Greene’s viewpoint that some of this selloff could be attributed to a market overreaction. “There’s a lot of froth built into the market coming into the second half, so seems like your normal intra-year decline here,” said the chief investment officer at NorthStar Asset Management in the same interview. — Lisa Kailai Han 6:16 a.m.: Investors say it’s ‘not time to hit the exit button yet’ following Japan-led sell-off A Japan-led global selloff sent markets into a tailspin to kick the week off, but several on the Street told CNBC on Monday morning that it’s not time to panic just yet. Dan Ives, tech analyst at Wedbush, acknowledged markets is in a “panic period,” especially as the technology sector takes a hit. Still, “this is not the time to panic in our opinion,” he said on the show. “It’s not the time to hit the exit buttons.” Gene Goldman, chief investment officer at Cetera, and Gennadiy Goldberg, head of U.S. rates strategy at TD Securities, echoed Ives’ sentiment on CNBC’s ” Worldwide Exchange .” While the CME FedWatch Tool shows the market has priced in a 50-basis point at the Federal Reserve’s September meeting, Goldman said that such a large cut seemed “outrageous” especially given “respectful” data like the current unemployment and GDP rates. He added that there still haven’t been enough bad data points yet to fully justify the market’s conclusion. Likewise, Goldberg agreed that the U.S. central bank is more likely to cut rates by 25 basis points throughout the rest of the year. “We haven’t seen a crisis yet,” he remarked. — Lisa Kailai Han 6:09 a.m.: Oppenheimer’s Stoltzfus: Best to not ‘jump to conclusions’ Investors need to have a cool head as global markets sell off, according to Oppenheimer’s John Stoltzfus. The sell-off that took place looked to us like the actions of a mix of bears—many of whom ironically had capitulated in droves throughout the first half of this year, nervous investors, and short-term traders who found catalyst as well in the reaction to the jobs number to take some profits without FOMO (fear of missing out),” the firm’s chief investment strategist wrote. “Based on the inherent volatility that the monthly jobs number has displayed in past revisions — sometimes better and sometimes worse — we would think it best for now not to jump to conclusions,” he added. — Fred Imbert 5:51 a.m.: Recession signals are ‘coming home to roost’, Evercore ISI says Signs of a recession are starting to pile up, according to Evercore ISI Chairman Ed Hyman. “With the soft employment report, the NASDAQ correction, the plunge in bond yields, and the plunge in commodity prices, it’s possible we’re seeing recession signals coming home to roost,” Hyman wrote in a Sunday note. His comments came after the U.S. government reported employment growth that was well below economist expectations on Friday. That report sent equities tumbling, with the Nasdaq Composite closing in a correction — down more than 10% below. The data also led to some on the Street to increase their odds for a 0.5 percentage point rate cut from the Federal Reserve. “Odds of a soft landing will increase if China weakness leads to a deeper plunge in WTI, pushing down inflation further, and allowing the Fed to be more aggressive,” Hyman wrote. “Odds of a hard landing will increase if China’s economy weakens too much, if house prices weaken too much, and/or if employment weakens too much.” — Fred Imbert 5:51 a.m.: Global markets in an ‘aggressive risk-unwind’, Vital Knowledge says Fears of a U.S. recession are pressuring global markets, leading investors around the world to sell some of this year’s top winners, according to Adam Crisafulli of Vital Knowledge. “Markets are caught in an aggressive risk-unwind as equities plunge around the world, with tech getting hit particularly hard,” he wrote in a note Monday. “There are fundamental underpinnings of the price action directionally (weak US growth, worries the Fed is ‘behind the curve’, some disappointing earnings reports during the Q2 season, worries about AI-related capex spending, etc.), but technical factors account for the velocity and magnitude of what’s happened in the last couple of sessions and into this morning.” Some of those technical drivers include “portfolio damage” that has spurred a “overall de-risking, creating a negative feedback loop whereby selling begets more selling.” “In addition, even fundamental bulls don’t see much reason to dive into the market given poor Aug seasonals and the absence of major catalysts in the immediate term … while Fed officials won’t overreact to a single labor report,” Crisafulli said. The Technology Select Sector SPDR Fund (XLK) , which tracks the S & P 500 tech sector, dropped 5.5% in the premarket Monday. XLK 1D mountain XLK plunges — Fred Imbert