US Stock Market Drop: Why Investors Are Worried?

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    Traders have been expecting the Federal Reserve to cut interest rates in September, and Fed Chair Jerome Powell pretty much confirmed this on Wednesday.

    The anticipation of a rate cut, expected in six weeks, has already been reflected in the stock market, which has been climbing over the past few months. Rate cuts usually boost stock prices because they lower borrowing costs for businesses, which can increase their profits.

    However, fear is creeping in as worries grow that the Fed might not be moving fast enough to support America’s job market.

    On Wednesday, Powell warned that the labour market is starting to show signs of weakness.

    On Thursday, the stock market took a hit, with the Dow dropping over 600 points. This decline suggests that the US economy might be entering a phase of slower job growth. The S&P 500 also fell by 1.5%, and the Nasdaq Composite, which includes many tech companies, plunged by 2.5%.

    The markets have been shaky recently. Disappointing earnings reports and worries about more tech regulations and unimpressive AI performance have dampened investor spirits. Companies are noticing that US consumers are spending less at restaurants and stores. Additionally, some early job data this week has looked weak.

    Despite recent market jitters, the US economy is still strong. Last week’s report on second-quarter gross domestic product showed solid growth, highlighting resilient consumer spending. Housing data is also showing signs of improvement, with mortgage rates falling to their lowest levels since February. Wall Street seems unbothered by Vice President Kamala Harris’ unexpected lead for the Democratic presidential nomination.

    Expect more ups and downs in the coming months as economists and investors navigate what could be a new chapter in America’s economic growth story.