US Markets Plunge, Tokyo Craters, Global Markets Rattled as US Recession Fears Mount

U.S. stock markets plunged today on growing concerns that the economy could be sliding into a recession or at least a slow-down.

The Dow Jones Industrial Average took another major hit after an initial plunge on Friday, dropping more than 1,000 points today, approximately or 2.5%. The S&P 500 fell 3% and the Nasdaq composite slid 3.4%.

That followed a stunning 12.4% plunge for Japan’s Nikkei 225 – its worst day since 1987. 

Investors are pulling money out of the markets amid signals the economy is getting weaker. Friday's disappointing July jobs report triggered the global market meltdown. U.S. employers slowed their hiring last month by much more than economists expected. 

It's not just stocks that have been taking a hit. The bond market is also reflecting fears of a slow-down; and even gold, which has a reputation for safety during tumultuous times, slipped about 1%.

The Federal Reserve has been walking a tightrope between its attempts to decrease inflation while not hurting the economy overall. 

But with employers clearly feeling economic pain and the unemployment rate now rising, the Fed may decide to take action soon by lowering interest rates. 

For now, the U.S. stock market is still up a healthy amount for the year and a recession is far from a certainty.  

Goldman Sachs economist David Mericle sees an increased chance of a recession, estimating it's around a 25% chance now following Friday’s jobs report. 

“It comes down to jobs,” said Quincy Krosby, chief global strategist for LPL Financial. They drive spending by U.S. consumers, which is what fuels or starves the U.S. economy. “When we get to Election Day, the unemployment rate is going to be extremely important.”

No one knows for sure how things are going to shake out, and that uncertainty is leading investors to be cautious.