Meanwhile, money flowed into bonds: The 10-year Treasury yield fell below 4 percent, a first since February. Bond yields fall when their prices rise.
The latest report on the ISM manufacturing index — a key metric of economic health — came in at 46.8 percent for July, lower than expected and down 1.7 percentage points from the 48.5 percent recorded in June. That sign of contraction in the manufacturing sector “fueled fears that rocky economic path is on the horizon — and fears that the Fed could be too late in cutting [interest rates] to avoid a recession,” said Dan Ives, a Wedbush analyst. “That’s having a massive risk-off in the market today, especially around tech stocks.”
But Ives says he believes the markets’ slide will be short-lived, especially because tech earnings were strong this week, and Federal Reserve Chair Jerome H. Powell on Wednesday indicated that the central bank could cut interest rates as soon as September.
Also Thursday, the Labor Department reported that unemployment insurance claims hit 249,000 for the week that ended Saturday, up 14,000 from the previous week. The next big test for the economy will come with the July jobs report, scheduled for release Friday morning. Economists predict that the report will show job growth slowed in July.
Christopher Rupkey, chief economist at Fwdbonds, said Thursday’s dip comes during a week when markets have been generally volatile.
“There has been a marked increase in market volatility and day-to-day changes this week, so when investors get a couple of economic reports showing weakness, the selling can push prices down quite rapidly,” he said in an email.
