Global Stocks Experienced Black Thursday: What's Next?

Following the Fed's warning that interest rates would remain high for an extended period of time, jobless claims data unexpectedly declined on Thursday, signaling continued tightness in the labor market. On September 21, U.S. Treasury yields soared to levels not seen since the subprime mortgage crisis, as investors grappled with concerns about inflation and the tight labor market. The $U.S. 10-Year Treasury Notes Yield (US10Y.BD)$ touched 4.498% and the $U.S. 2-Year Treasury Notes Yield (US2Y.BD)$ rose to 5.204%, both reaching 16-year highs.

The surging Treasury yields, coupled with uncertainty around economic growth prospects, triggered a global stock sell-off, leading to the so-called “Black Thursday”: All three major U.S. stock indexes closed with losses for the third consecutive day. The $S&P 500 Index (.SPX.US)$ posted its biggest drop in nearly six months, declining 1.64%, while the $Nasdaq Composite Index (.IXIC.US)$ slumped 1.82%, ranking second only to Brazil's Ibovespa index in terms of daily losses. In Europe, major country-level indexes took a hit, with drops exceeding 1% for German, French, and Italian stocks.

Goldman Sachs chief economist Jan Hatzius warns that the autoworkers' strike, government shutdown, and the resumption of student loan payments may derail hopes for a soft landing of the U.S. economy. As a result, GDP growth in Q3 and Q4 could slow down sharply. Economist and former Treasury Secretary, Larry Summers, also cautions that the Federal Reserve is too optimistic about the prospect of a soft landing and that there are imminent economic risks. The $CBOE Volatility S&P 500 Index (.VIX.US)$, or "fear index," surged 15.85% on Thursday to reach a one-month high of 17.54, after hitting its lowest point since 2020 last week.