Claim:
On Aug. 5, 2024, the U.S. stock market lost $1.93 trillion in market capitalization, Nasdaq fell by more than 1,000 points and Nasdaq and the Dow Jones hit all-time lows.
Rating:
Mixture ( About this rating? )
What's True:
The Nasdaq Composite index fell by more than 1,000 points at opening on Aug. 5, 2024, more than the largest intraday 970-point drop …
What's False:
… however, the point drop reflected after-hours and pre-market trading, which tends to be more volatile than in-session trading. Also, it was not true that both the Nasdaq and the Dow Jones Industrial Average hit "all-time lows."
What's Undetermined:
We were not able to calculate the entirety of the market capitalization lost on Aug. 5, though we were able to ascertain that the top seven companies of the technology sector were responsible for the largest part of the drop. Still, those companies recuperated some of their early-day losses by closing.
A claim that U.S. stock indices hit all-time lows during a market rout on Aug. 2 and Aug. 5, 2024, immediately began to circulate as the market dipped. One social media user made several claims in a post on X ( archived ):
The post, accompanied by two videos and two screen captures (including one of a post by former U.S. President Donald Trump on Truth Social), read:
Breaking : More than $1.93 trillion has vanished from the US stock market today as the Nasdaq plunged by over 1,000 points. Reports indicate that the Nasdaq and The Dow has hit an all-time low, even intraday. Is the US heading to The Great Depression 2.0.
"We have never been down 1,000+ points ever…not even intraday—on the NASDAQ."
Trump's post on Truth Social, entirely capitalized, read:
STOCK MARKETS ARE CRASHING, JOBS NUMBERS ARE TERRIBLE, WE ARE HEADING TO WORLD WAR lll, AND WE HAVE TWO OF THE MOST INCOMPETENT "LEADERS" IN HISTORY. THIS IS NOT GOOD!!!
This X post had garnered more than 323,000 views, as of this writing. Some people on the platform responded with alarm. "It's gonna go down a lot further," one said. "The great depression," another posted. "Bidenomics," a third one added, implying that the economic policies implemented by President Joe Biden were the cause of the market rout.
The information shared on the post was confusing, so we tried to parse it out. Some of it is true, but uses unhelpful comparisons, and some of it is false. For this reason, we rated the claim a "Mixture."
- Did the stock market's dip wipe out $1.93 trillion in market capitalization on Aug. 5, 2024? We didn't have number for overall market capitalization (market cap) losses for the entirety of the stock market. But looking at those who weigh heaviest on the stock market in market cap, the "Magnificent Seven" of the technology sector ( Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla), we were able to ascertain that they lost $995 billion at opening on Aug. 5 , recuperating about a third of this drop at close, for a total of $653 billion in lost market cap .
- Did the Nasdaq fall by more than 1,000 points on Aug. 5, 2024? Assuming the poster was talking about the Nasdaq Composite, a broad-based market index that includes more than 3,700 stocks listed on the Nasdaq stock exchange, we can confirm that it opened on Aug. 5 more than 1,000 points lower than it had closed on Aug. 2, 2024 , a decline of more than 6%. On Aug. 2, the Nasdaq closed at 16,776.16. On Aug. 5, it opened at 15,712.53, a 1,063.63-point difference, which represented a 6.34% drop. But by the end of the day, the Nasdaq had risen back to 16,200.08 — a 576.08-point or 3.43% fall.
Compared to historical intraday trading, it is indeed the largest point swing ever. The largest intraday drop — 970.28 points — happened March 16, 2020 . However, the 1063.63-point drop at opening reflected not intraday, but after-hours and pre-market trading over a weekend. While it can be useful to assess the reaction of investors to news released between sessions, it is not the most accurate measure of volatility. As Investopedia says : "After-hours price changes are often more volatile than regular-hours prices, so they should not be relied on as an accurate reflection of where a stock will trade when the next regular session opens." Indeed, as the day continued, the index made up nearly half of those losses.
- Did the Nasdaq Composite and the Dow Jones hit an "all-time low" on Aug. 5, 2024? No, the Nasdaq Composite and the Dow Jones Industrial Average, a stock market index of 30 major companies, did not hit "all-time lows" that day. All-time lows would mean that both indices would have had to drop to a lower point than when they were created. For the Nasdaq Composite, this was in 1971, when it started at 100 points . For the Dow Jones, this was in 1896, when it started at 40.94 points . Instead, we looked at the times when the two were last hit these levels. For the Nasdaq Composite, it was on May 3, 2024, when it closed at 16,156.33. For the Dow Jones, it was on June 3, 2024, at 38,571.03 points (it closed on Aug. 5 at 38,703.27 points).
What Happened to the Stock Market?
As we've reported before , the stock market rout began Aug. 2, 2024, triggered by a weaker-than-expected U.S. jobs report (typically published before the opening of trading at 8:30 a.m. EDT). This came two days after the U.S. Federal Reserve announced it would maintain its key interest rate above 5%, stoking fears that it would be too slow to react to an economic downturn.
The market then extended its losses after three of the top seven technology companies — Nvidia, Apple and Alphabet — were hit by negative reports. Due to the size of their combined market cap, these seven companies have a disproportionate impact on U.S. stock indices and the market as a whole. Later, Japan's top index, the Nikkei 225, registered a 12.4% plunge, its largest since 1987 , also contributing to investors' concerns in the U.S. at opening on Aug. 5.
However, by Aug. 6, 2024, the markets had begun to rebound, spurred by the rise in Japan's stocks, which recuperated most of their losses from the previous day. On Aug. 7, the Bank of Japan, the country's central bank, walked back its plan to raise interest rates while markets recovered. Reassured, investors were more willing to take risks.
Sources:
'Does After-Hours Trading Affect Stock Prices?' Investopedia, https://www.investopedia.com/ask/answers/05/saleafterhours.asp . Accessed 7 Aug. 2024.
Levy, Rohan Goswami, Ari. '$1 Trillion Wipeout: Market Rout Punishes Megacap Tech'. CNBC, 5 Aug. 2024, https://www.cnbc.com/2024/08/05/1-trillion-wipeout-market-rout-punishes-mega-cap-tech.html .
Magnificent 7 Stocks Shed $653 Billion in Market Cap Today. https://www.barrons.com/livecoverage/stock-market-today-080524/card/magnificent-7-stocks-have-shed-762-billion-in-market-cap-today-SM4vIJVsTjSEgERFTxVL . Accessed 7 Aug. 2024.
NASDAQ Composite Index. https://www.nasdaq.com/market-activity/index/comp .
Rascouët-Paz, Anna. 'Biden's Senior Economic Adviser Gene Sperling Resigned After Stocks Tumbled?' Snopes, 6 Aug. 2024, https://www.snopes.com//fact-check/biden-economic-adviser-resigned/ .
Shimbun, The Yomiuri. Official: Bank of Japan Won't Raise Rates Amid Instability; Deputy Chief Says Central Bank Will Closely Observe Markets. 7 Aug. 2024, https://japannews.yomiuri.co.jp/business/economy/20240807-203439/ .
Terrell, Ellen. Research Guides: This Month in Business History: Dow Jones Industrial Average First Published. https://guides.loc.gov/this-month-in-business-history/may/djia-first-published . Accessed 7 Aug. 2024.
Thompson, Laura He, Marc Stewart, Mark. 'Japanese Stocks Crash in Biggest One-Day Drop since 1987 as Global Market Rout Intensifies | CNN Business'. CNN, 5 Aug. 2024, https://www.cnn.com/2024/08/04/investing/japan-nikkei-stock-rout-intl-hnk/index.html .
'What Does the Nasdaq Composite Index Measure?' Investopedia, https://www.investopedia.com/terms/n/nasdaqcompositeindex.asp . Accessed 7 Aug. 2024.
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