On Thursday, the fear of recession made its way to the heart of Wall Street as a mass sell-off is recorded. A combination of the cooling of the job market and slowing down in manufacturing has pushed the investors towards caution, joining the slowing interest rates, which were delayed to be reduced by the Federal Reserve. Heavy declines were seen in big tech stocks, with the Dow Jones Industrial Average sliding nearly 500 points.

Wall Street investors sold a lot on Thursday over fears that the U.S. might be pushed into recession. The job market cools, manufacturing slows, and hopes for an interest rate cut by the Federal Reserve to avoid the recession begin to fade.

The Dow Jones Industrial Average dropped nearly 500 points, about 1.2%. The S&P 500 was off 1.3% on the session. Big tech companies took a beating, with their stock prices tumbling.

Just the day before, there was a rally on Wall Street because Meta’s second-quarter earnings were better than expected. But on Thursday, the tech-heavy Nasdaq index fell by 2.3%. Things got worse after the markets closed Thursday, with Intel announcing it would lay off 15,000 workers and Amazon reporting disappointing results.

Two economic data points out Thursday spooked investors even further: Manufacturing activity hit an eight-month low in July, according to the Institute for Supply Management. The number of Americans filing new applications for unemployment benefits rose to an 11-month high last week.

Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York, commented, “The ISM report really got things started today, and then the selling just kept going.” He also mentioned that we are still in the earnings season, and it is a time when we could have positive or negative surprises influencing the market.

Thursday’s sell-off notwithstanding, the stock market has been really very strong this year. Both the S&P 500 and Nasdaq are up 14.3% and 16% this year, respectively. Just a day earlier, both the S&P 500 and Nasdaq notched their largest daily percentage gains since February, as chip stocks rallied following the Federal Reserve’s decision to keep interest rates steady.

The Federal Reserve voted to keep interest rates high Wednesday until September. Investors had been preparing for such an action by the central bank and also looking at the possibility of the first rate cut next month. Chairman Jerome Powell of the central bank said it is ready to lower the rates soon, although such a move shall be based on the stable inflation this summer. In June, the inflation eased to 3%, which is its lowest point since prices started to quicken up in 2021.

“If inflation stays high, we will have to consider that along with other factors,” said Powell on Wednesday. He added that the focus of the Federal Reserve also remains on the labor market. The jobless rate reached 4.1 percent in June, the highest since 2021.

The next meeting of the Federal Reserve is due on September 20. Investors are keenly waiting to see any update regarding interest rates and what the central bank says about the future course of the economy.

This is clearly indicated by the recent sell-off, showing how sensitive markets are to every kind of economic news and sentiment. Despite very strong equity markets this year, fears of recession undoubtedly swing sentiments and will surely push the markets down terribly within a very short time. Given the pace at which the change took place—essentially in the blink of an eye—concerns about a possible recession have altered sentiment, with investors closely watching economic indicators and corporate earnings reports for signs of strength in the economy and any evidence of growth ahead.

As the earnings season plays itself out, further swings in equity markets should not be ruled out. Positive surprises could enthuse investors and make them rally, while negative news could trigger off more sell-offs. It is certainly a tough time for investors straddling between mixing economic data, company performance, and Federal Reserve decisions.

All in all, the news signals that being informed and prepared for volatility is the way to go. It can be from deep analysis of economic reports or listening to company earnings; investors have to be very vigilant and ready to adapt to any changes within a changing market.