Thursday morning witnessed a bloodbath on the US stock markets, with the Dow Jones Industrial Average plunging more than 550 points, driven by steep losses for tech giant Apple.
The plunge in the US stocks followed two sessions of rally, and was triggered mainly by the release of key economic data. Though the jobs report showed the number of Americans filing for unemployment claims fell to the lowest level in five months, a report from the Commerce Department confirmed that the economy contracted in the first half of this year.
In the morning trade, the Dow Jones Industrial Average plunged nearly 2 percent, while the S&P 500 nosedived 2.4 percent and the Nasdaq Composite lost more than 3 percent.
Though the jobs report came in better than expected, the fears that the Federal Reserve will continue to raise rates to tame runaway inflation roiled market sentiment.
The rout in the markets was unexpected as it came after two successive days of rallies. On Wednesday Dow had gained more than 500 points while the S&P 500 gained 2 percent. "For a more sustained rally, investors will need to see convincing evidence that inflation is coming under control, allowing central banks to become less hawkish," UBS analyst Mark Haefele said, according to CNBC.
The heaviest losses came in for smartphone giant Apple. The blue chip stock declined more than 4 percent after Bank of America downgraded it from buy to neutral.
Last week, economist Nouriel Roubini had warned that the incoming US recession will be "long and ugly", adding that it will cause a sharp fall in the S&P 500 stock market index.
Even in a plain vanilla recession, the S&P 500 can fall by 30 percent, Roubini, adding that in a real hard landing, the fall could be as big as 40 percent. Roubini, the chairman and chief executive officer of Roubini Macro Associates, is known as Dr. Doom as he had correctly predicted the 2008 financial crisis.
It was not the first time that Roubini had made grim predictions for the economy and the stock markets in the recent months. In July Roubini had warned that the economy was heading to a recession. He made it clear earlier this year that the global economy was headed for a severe crisis. He said that unprecedented debt levels and rising inflation has created a 'stagflationary debt crisis'.
The unseemly rise of the US dollar against other major currencies has had its impact on other asset classes. Even as the dollar is rising relentlessly, other asset classes have been declining. While the US stocks have dropped more than 19 percent, the value of once-soaring bitcoin has more than halved. Gold, which is seen as a safe haven asset in time marked by crises, has also lost more than 7 percent.