Five Things You Need to Know to Start Your Day: Americas

Good morning. Global stocks are falling with US futures in the red as a tech-led selloff accelerates. Meanwhile, concerns about the US econo [View in browser]( [Bloomberg]( Good morning. Global stocks are falling with US futures in the red as a tech-led selloff accelerates. Meanwhile, concerns about the US economy are fueling speculation as to when the Federal Reserve will cut interest rates. And Mars is considering making a major deal in the snack industry. Here’s what traders are talking about. — [Morwenna Coniam](. Want to receive this newsletter in Spanish? [Sign up to get the Five Things: Spanish Edition newsletter](. Stocks slump The global stock-market decline picked up speed on Monday, with losses cascading across tech shares and the Nasdaq 100 set for its biggest opening drop in more than four years. Japan’s equity benchmarks have slid more than 20% from record highs reached last month while European stocks are also falling. The yen surged 3%, while the Mexican peso’s slump extended. Fed bets [Global bonds]( erased their losses for the year as concern the US economic outlook is rapidly worsening spurs demand for fixed-income assets. Meanwhile, traders ramped up bets that the Federal Reserve will step in with an emergency interest rate cut, putting the [odds]( at 60% for a quarter-point reduction within one week. Treasuries posted small moves after a rally that sent the 10-year yield to the lowest in a year and a gauge of the [dollar]( dipped. Apple stake Megacap technology stocks [bore the brunt]( of the selloff, with chipmaker Nvidia falling over 7% and Apple down 8% in premarket trading. Adding to pressure on tech, Berkshire Hathaway slashed its stake in Apple by almost 50% as part of a massive second-quarter selling spree. Analysts are urging Apple investors to remain calm, despite a delay in the company’s much-hyped AI rollout. Rising tensions Elsewhere, oil extended a slide from a seven-month low as the selloff in wider financial markets countered rising tensions in the Middle East. Israel is [bracing itself]( for a possible attack from Iran and regional militias in retaliation for assassinations of Hezbollah and Hamas officials. Cryptocurrencies also reeled from risk aversion in global markets. Still, some are viewing the market situation as a [healthy correction]( a period of growth after a period of heady gains. Mars mulling a deal Aside from the global market selloff, a major consumer deal may be in the works. Confectioner [Mars is considering buying]( snack-maker Kellanova, according to people familiar with the matter. An acquisition of Kellanova, which was spun off from Kellogg Co last year, would give Mars brands such as Pringles, Cheez-It and Pop-Tarts. Considerations are ongoing and no final decisions have been made, but with Kellanova valued at $21.6 billion, it could be one of the biggest deals in the industry this year. What We’ve Been Reading This is what’s caught our eye over the past 24 hours. - Kamala Harris is[meeting with possible running mates]( as her decision nears - Israel is bracing for a [possible attack from Iran]( - UK Prime Minister Keir Starmer called an emergency security meeting after[riots flared up across the UK]( - [Venezuela risks becoming a police state]( its socialist regime fights to remain in power after contested election - Wealth advisers see [growing interest in migration]( the UK and France after elections And finally, here's what Joe’s interested in this morning There is a lot going on right now. So I'm going to just list some thoughts that are in my head, and not in any particular order: 1) When I read the [transcript]( of last Wednesday's Powell comments, I was really struck by a few things. One was the lack anxiety about the state of the labor market. The data has clearly been slowing on this front for some time now. And you can pick almost any indicator you want. The Quit Rate has been coming down. Initial Jobless Claims have been rising. The employment sub-index of various manufacturing surveys have been weak. Wages are mellowing. Unemployment has been rising (as of the Fed meeting it was still just at 4.1%, though two days later we would learn that it would go to 4.3%). However Powell was still open to the possibility that we weren't really seeing weakening, per se, but rather normalization to a job market that more resembled 2019 than anything we've seen in the post-Covid period. 2) What seemed odd, to me anyway, about comparing the labor market to 2019 is that even if some of the levels are (or were) similar, the trajectory has not been 2019 like at all. In 2019 the unemployment rate was generally improving throughout the year. Whereas in 2024 (again, even before Friday) the unemployment rate has been rising all year. 3) Furthermore, while Powell signaled that a rate cut could come in September, he was not that definitive about it. He certainly didn't declare that the start of the rate cut cycle was at hand. In fact, in an answer to the FT's Colby Smith he said "I would just say I can imagine a scenario in which there would be everywhere from zero cuts to several cuts, depending on the way the economy evolves and I wouldn't want to lay out a baseline path for you there today." So not only did he declare September the start of the rate cut cycle, he clearly opened the door to the possibility of no cuts at all anytime soon. 4) Then of course on Friday we got that Non-Farm Payrolls shocker, with the unemployment rate jumping to 4.3%, triggering The Sahm Rule. Now of course, the Sahm Rule is not some iron law of economics. It does NOT state that when the 3-month moving average of the unemployment rate rises 50bps above the most recent 12 month low that we're definitely going into a recession. What it does state is that every time in the past that this has happened we have gone into a recession. Of course it could be different this time. And there are some reasons to think that perhaps the labor market is not quite as bad as Friday's Jobs Report made it seen. Matt Klein has a [good piece]( on that here. Weather and/or other temporary layoffs probably exaggerated some of the labor market weakness. Also so far most of the rise in the unemployment rate this year has been from new labor market entrants not being able to find work, rather than a substantial increase in people permanently losing their jobs. So maybe it's not quite so bad. But again, every labor datapoint lately has come in on the weak side, and here you have a Powell press conference which was not at all sounding pro-active about getting ahead of the weakness, holding out hope that this is just "normalization" rather than the wheels coming off. 5) Even the phrase "normalization" when it comes to the labor market is a bit odd. Yes, during the Covid period we saw some actually abnormal things (such as a historic surge in the number of job openings relative to unemployed workers). But one thing you'll note about the unemployment rate is that it basically never just sits there. It's always going in one direction or another. Always. And right now it's on the rise. Again, it could be different for various reasons. Maybe next month the unemployment rate will drop. But from a risk management standpoint, there's a good reason to think it's heading higher (because it tends to trend) and as of Wednesday, the Fed didn't seem to be in risk management posture. 6) You probably can't say definitively yet that the Fed has made a "mistake" but what you can say is that the Fed we heard from on Wednesday is now quite offsides the market. As of right now, the overwhelming consensus is not just that there will be a 50bps rate cut in September, [at one point this morning]( the market was pricing in an emergency rate cut at some point. Follow Bloomberg's Joe Weisenthal on X [@TheStalwart]( [Bloomberg Markets Wrap: The latest on what's moving global markets. Tap to read.]( Follow Us Stay updated by saving our new email address Our email address is changing, which means you’ll be receiving this newsletter from noreply@news.bloomberg.com. 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