U.S. recession fears lift Fed rate cut expectations

U.S. stocks sold off on Thursday, with the Dow on track for its worst day of the year. The Dow fell more than 1.6 per cent, while the SP 500 lost more than 2 per cent and the Nasdaq more than 3 per cent. Some of the latest data raised concerns in the market about a possible recession and the perception that it may be too late for the Federal Reserve to initiate a rate cut. U.S. initial claims rose the most since August 2023 in the latest week. And the ISM manufacturing index, a barometer of factory activity in the U.S., posted a weaker-than-expected 46.8 per cent, suggesting the economy is contracting. "Today's economic data continues to show a downward trend, if not a recession," said Chris Rupkey, chief economist at FWDBONDS. "The stock market doesn't know whether to laugh or cry because the winds of recession are blowing hard despite the fact that the Federal Reserve may cut interest rates three times this year." Some companies that could be badly hit by a recession led the declines, with JPMorgan Chase (JPM.N) down nearly 3 per cent and Boeing (BA.N) down more than 7 per cent. Even big tech stocks such as Nvidia felt the pain, with shares down 8 per cent, as investors may sell off some of their chips at a time when markets are likely to be more volatile as November's U.S. elections approach.