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    US stock market rebound after major market selloff during recession fears

    August 7, 2024

    Key points: 

    • US stock indices rose after major averages experienced heavy selling pressure. 
    • Sharp drop in the Japanese stock market contributes to increased volatility. 

    US stock indices climbed in an attempt to recover from the steep losses seen at the beginning of the week as fears of a US recession mounted.

    The Dow Jones Industrial Average (Symbol: DJ30), S&P 500 (Symbol: SP500) and Nasdaq Composite (Symbol: NAS100) had tumbled in regular trading on Monday, experiencing their worst sessions since September 2022. 

    Picture: The US stock market rebounded near a session high, as observed on the VT Markets app

    The Dow Jones fell 2.6%, while the S&P 500 dropped 3%. The tech-heavy Nasdaq Composite plunged 3.43%, driven by substantial declines in major technology stocks. Nvidia, a key player in this year’s rally, dropped 6.4%. Other notable tech giants like Microsoft and Tesla fell 3.3% and 4.2%, respectively. Apple saw a significant decline of 4.8% after Warren Buffett’s Berkshire Hathaway announced it had halved its stake in the iPhone maker. 

    What is happening outside the US 

    Outside the US, there is a sharp decline in the Japanese stock market, marking the worst performance since Wall Street’s Black Monday in 1987, and the rapid unwinding of the yen “carry trade” also played a role in the heightened volatility.

    This global market turbulence added to the already mounting concerns about a potential US recession, influencing investor sentiment worldwide. 

    What can a short-term trader do 

    The rebound in the US stock market indicates potential for short-term gains, particularly if the positive sentiment holds.

    However, the underlying fears of a US recession and global market instability suggest that volatility will remain high.

    The CBOE Volatility Index (VIX) had spiked to a peak of 65.73 on Monday, reaching levels last seen during the COVID-19 pandemic.

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