Concerns about the health of the economy caused significant losses in US stocks on Monday. The Dow Jones Industrial Average fell 300 points, while the S&P 500 declined by 0.3% and the Nasdaq Composite added only 0.1%. This decline was triggered by new data showing that the Institute for Supply Management manufacturing index dropped to 48.7% in May, indicating a contraction in the US manufacturing industry.
Investors reacted with fear to this soft data, signaling a potential shift in equity markets. Recent data has indicated that inflation remains high while the economy is cooling, leading to concerns that the Federal Reserve may keep interest rates higher for longer than expected. Despite these worries, major stock indexes ended May with their sixth winning month in seven.
The Personal Consumption Expenditures price index showed inflation staying high in March, and new GDP data indicated a weaker pace of economic expansion in the first quarter of the year. While there are concerns about a slowdown, experts like Keith Lerner, chief market strategist at Truist, believe that the economy is normalizing rather than entering a recession.
In addition to economic concerns, technical issues also plagued traders on Monday when a glitch on the New York Stock Exchange caused trading halts for some stocks and led to a significant drop in Berkshire Hathaway shares. The issue has since been resolved but it added to the unease in markets as it’s still an evolving situation with updates being provided as more information becomes available.
Overall, US stocks faced significant losses on Monday due to concerns about economic health and technical issues on exchanges. Despite these challenges, experts believe that the economy is normalizing rather than entering a recession and hope for stability moving forward.
