US stock futures are facing a significant decline for the third consecutive session, reflecting investor concerns about the weakening US economy. This sentiment was reinforced by a disappointing July jobs report, which revealed a higher-than-expected unemployment rate of 4.3%.
The Dow futures are down by 600 points, equivalent to a 1.5% decrease. Similarly, the S&P 500 futures have fallen by 2.7%, while Nasdaq futures are showing a substantial 4.5% decline.
The recent downturn in the tech-heavy Nasdaq index can be attributed to growing skepticism on Wall Street regarding the lofty valuations attached to artificial intelligence (AI) technologies. Hopes of substantial profits from AI advancements had been a driving force behind the surge in tech stocks, which had been propelling the overall market to record highs throughout the year.
However, the current market sentiment indicates a shift, with investors now apprehensive about the realization of AI-related profits, especially in the event of an economic downturn. This shift is exemplified by Warren Buffett's decision to reduce Berkshire Hathaway's stake in Apple by half.
While a US recession may not be imminent, the sudden increase in the unemployment rate signals potential challenges ahead. Consequently, investors are opting for a more conservative approach by divesting from stocks and turning towards bonds. The 10-year Treasury yield, which moves inversely to bond prices, has experienced a notable decline to 3.74%, down from 4% at the beginning of the month.
