This morning, Nasdaq futures are down 6%, the S&P 500 dropped 4.5%, and the Dow is sulking with a 3.1% loss. Japan’s Nikkei decided to take a nosedive, falling a staggering 12.4%. The US 10-year bond yield took a 10% hit, and Bitcoin is down 15%. Nvidia, the darling of tech stocks, is down 14% in premarket trading. Investors are on the verge of a collective meltdown. Looking at global indices right now, It’s a sea of red...So, what’s the deal?

Market trends often feel like they’re being dictated by a wizard from a fantasy novel—confusing and unpredictable. Usually, investors have all the information they need to make decisions, but the interplay of risks and opportunities makes investing more of an art than a science. In the past month, especially in the U.S., several forces have been jostling for control, causing a spike in volatility. The VIX index, which measures market volatility, has hit its highest level since March 2023, soaring to around 23 points. It might not sound like much, but in the world of finance, it’s like a caffeine overdose.

The market has abruptly shifted from a theory of a resilient economy, buoyed by AI innovation and falling interest rates, to a doomsday scenario where the U.S. economy is headed for a recession. Investors are now in full panic mode, selling everything and hoarding ultra-secure bonds. Extreme scenarios dominate when emotions take the wheel. Concluding that the U.S. economy is doomed based on one employment statistic, one weak manufacturing index, and a month’s consumer data is like predicting the end of the world because you saw a black cat. Investors are fickle creatures.

Just ten days ago, a single Fed rate cut was enough to keep everyone happy. Now, the market is eyeing four rate cuts this year, with the first 50 basis point cut expected in September. Even Elon Musk has joined the chorus, calling the Fed a villain. It’s like watching a soap opera.

Meanwhile, investors have been selling Japanese stocks like there’s no tomorrow. In three weeks, the Nikkei 225 and the TOPIX have lost 20%! The Nikkei 225 alone plunged 12% overnight. The Tokyo Stock Exchange is caught in a perfect storm: profit-taking and a paradigm shift as the Bank of Japan tightens its ultra-loose monetary policy, sending shockwaves through the global bond market and hurting Japanese exporters. Cryptocurrencies are also on a rollercoaster, which can’t be good news for Donald Trump, who’s been quite fond of them lately. Oil prices are falling due to recession fears, despite tensions in the Middle East. In summary, the market is awash with negative news: fears of a U.S. recession, the Japanese market collapse, and a few additional blows like Nvidia’s delayed AI chips and Berkshire Hathaway dumping Apple shares.

Even China’s attempt to boost its economy with 20 new measures, from employee-free stores to eSports, hasn’t done much to lift spirits. With U.S. economic concerns mounting, today’s release of the July ISM services index is more crucial than ever. Corporate earnings reports are slowing down this week, but we still have big names like Caterpillar, Amgen, Uber, Costco, Walt Disney, and Eli Lilly to look forward to. 

Today's economic highlights:

The PMI services indices for the major economies are due to be released throughout the day, along with the ISM services index for the United States. The full agenda is here.

The dollar is falling to EUR 0.9106 and GBP 0.7838. The ounce of gold is down to USD 2,370. Oil fell, with North Sea Brent at USD 75.54 a barrel and US light crude WTI at USD 71.71. The yield on 10-year US debt falls to 3.69%. Bitcoin is trading at USD 50,400.

In corporate news:

  • Nvidia- Design flaws could delay the launch of the group's next artificial intelligence chips by three months or more, The Information reported on Friday. Nvidia fell by 8.8% before the opening. Other semiconductor manufacturers such as BROADCOM, MARVEL TECHNOLOGY , AMD and INTEL lost between 4.8% and 7.8%.
  • Apple plunges 7.2% before the opening. Berkshire Hathaway has halved its stake in the consumer electronics group, and now owns around 400 million shares worth $84.2 billion at June 30.
  • Berkshire Hathaway - The group's liquidity climbed to nearly $277 billion even as the conglomerate posted record quarterly operating profit, according to its results released on Saturday.
  • Kellanova - Mars, the food giant, is considering a possible acquisition of Kellanova, a group valued at $22 billion, according to sources familiar with the matter. The stock gained 5.9% before the opening.
  • AMC reported a second-quarter loss, penalized by the impact of last year's two Hollywood strikes, which limited new theatrical releases. The stock lost 6% before the opening.
  • BionTech- The German laboratory, a partner of PFIZER, announced on Monday that it had quadrupled its second-quarter losses, as it focuses on a change of strategy towards new cancer treatments following a sharp drop in sales of its COVID-19 vaccine.
  • The Carlyle Group - On Monday, the private equity firm reported a sharper-than-expected fall in second-quarter distributable earnings, down 11.7% year-on-year.
    Meanwhile, private equity firm Quantum Capital Group is to buy US independent power producer Cogentrix Energy for around $3 billion from funds managed by Carlyle, the two groups announced on Monday.
  • Crowdstrike on Sunday rejected Delta Air Lines claim that the IT security group was responsible for the flight disruptions that occurred on July 19 after a giant computer failure.

Analyst recommendations:

  • Albemarle Corporation: Baird downgrades to neutral from outperform with a price target reduced from USD 102 to USD 85.
  • Baker Hughes Company: Baptista Research downgrades to hold from outperform with a price target raised from USD 39.60 to USD 42.60.
  • Bank OZK: Morgan Stanley maintains its equal weight rating with a price target raised from USD 48 to USD 51.
  • CACI International Inc: Raymond James downgrades to market perform from outperform.
  • Celanese Corporation: JP Morgan upgrades to neutral from underweight with a target price reduced from USD 156 to USD 130.
  • Comerica Incorporated: Morgan Stanley maintains its equal weight rating with a price target raised from USD 50 to USD 61.
  • Dexcom, Inc.: Baptista Research downgrades to buy from outperform with a price target reduced from USD 148.50 to USD 91.10.
  • Essent Group Ltd.: Keefe Bruyette & Woods upgrades to outperform from market perform with a price target raised from USD 65 to USD 70.
  • Fifth Third Bancorp: Morgan Stanley maintains its equal weight rating with a price target raised from USD 40 to USD 47.
  • Flex Ltd.: Baptista Research upgrades to buy from hold with a price target raised from USD 32.70 to USD 36.60.
  • Intel Corporation: DZ Bank AG Research downgrades to sell from hold with a price target reduced from USD 34 to USD 20.
  • Kellanova: BNP Paribas Exane upgrades to outperform from neutral with a price target raised from USD 66 to USD 74.
  • Lennar Corporation: Seaport Global downgrades to neutral from buy.
  • Lockheed Martin Corporation: RBC Capital upgrades to outperform from sector perform with a price target raised from USD 500 to USD 600.
  • M&T Bank Corporation: Morgan Stanley maintains its overweight rating and raises the target price from USD 195 to USD 220.
  • Moderna, Inc.: RBC Capital downgrades to sector perform from outperform with a price target reduced from USD 125 to USD 90.
  • NXP Semiconductors N.V.: AlphaValue/Baader Europe upgrades to accumulate from reduce with a price target reduced from USD 278 to USD 274.
  • Prologis, Inc.: RBC Capital downgrades to sector perform from outperform with a price target raised from USD 124 to USD 127.
  • PulteGroup, Inc.: Seaport Global downgrades to neutral from buy.
  • Range Resources Corporation: Gerdes Energy Research LLC upgrades to buy from neutral with a target price of USD 37.
  • Robinhood Markets, Inc.: Citi downgrades to neutral from sell with a target price of USD 18.
  • Rocket Companies, Inc.: Keefe Bruyette & Woods upgrades to market perform from underperform with a price target raised from USD 10.75 to USD 17.
  • Royal Caribbean Group: Baptista Research upgrades to buy from hold with a price target raised from USD 157.40 to USD 182.20.
  • Synovus Financial Corp.: Morgan Stanley maintains its equal weight recommendation with a price target raised from USD 41 to USD 51.
  • Toll Brothers, Inc.: Seaport Global downgrades to sell from neutral with a target price of USD 108.
  • Valero Energy Corporation: Baptista Research downgrades to hold from outperform with a price target reduced from USD 182.20 to USD 172.30.
  • Vertex Pharmaceuticals Incorporated: Barclays downgrades to equal weight from overweight with a price target raised from USD 472 to USD 509.
  • Flutter Entertainment Plc: AlphaValue/Baader Europe upgrades to add from reduce with a price target reduced from 166.14 to GBX 165.82.
  • Greggs Plc: HSBC downgrades to hold from buy with a target price of GBP 33.50.
  • Lloyds Banking Group Plc: Citi downgrades to neutral from buy with a price target reduced from 68 to GBP 60.
  • Pennon Group Plc: Barclays downgrades to equal weight from overweight with a price target reduced from GBP 9.55 to GBP 6.85.
  • Prudential Plc: Deutsche Bank downgrades to hold from buy with a price target reduced from GBX 1350 to GBX 865.
  • United Utilities: Barclays downgrades to underweight from equal weight with a price target reduced from GBP 13.15 to GBP 9.75.