Stock market today: Worries about the economy slam Wall Street, and the Dow drops 700 points

NEW YORK (AP) — Just a day after rallying on hopes that the Federal Reserve is about to cut interest rates, U.S. stocks tumbled Thursday after weakdata raised worries the Fed may have missed its window to do so before undercutting the economy's growth.

The S&P 500 sank 2% after a report showed U.S. manufacturing activity is still shrinking, and its contraction is accelerating. Manufacturing has been one of areas of the economy hurt most by high rates, and the report from the Institute for Supply Management helped extinguish what had been gains for U.S. stock indexes early in the morning.

The Dow Jones Industrial Average dropped 704 points, or 1.7%, and the Nasdaq composite was 3% lower, with about an hour remaining in trading.

The action was even stronger in the bond market, where the yield on the 10-year Treasury yield tumbled below 4%, back to where it was in February. Besides the soft manufacturing data, reports earlier in the morning showed that the number of U.S. workers applying for jobless benefits hit its highest level in about a year and that productivity for U.S. workers improved during the spring.

Together, the data likely remove upward pressure on inflation and give more leeway for the Federal Reserve to cut interest rates soon. A day earlier, yields sank after Fed Chair Jerome Powell gave the clearest indication yet that inflation may have slowed enough for an easing of rates to begin in September.

But the data also raised worries that the Fed may have held rates too high for too long in its zeal to stifle inflation. It's been keeping its main interest rate at a two-decade high for roughly a year, and that has made it more expensive to borrow to buy a house, car or anything on credit cards. And it could take months to a year for the full effects of a rate cut to filter out into the economy.

Stocks of companies whose profits are most closely tied to the economy's strength had some of Wall Street's sharper drops. Energy stocks in the S&P 500 fell 2.8%, for example, while industrial companies in the index weakened by 2.3%.

The small stocks in the Russell 2000 dropped 3.6%. They had soared more than the rest of the market last month on hopes that the economy would remain solid as interest rates come down, a potent cocktail for them.

The weak economic numbers raise the stakes for an already highly anticipated report coming on Friday. Economists expect it to show a slight slowdown in U.S. hiring last month, and Wall Street's hope is for a Goldilocks type of reading that is neither so hot that it puts upward pressure on inflation nor so cold that it worsens worries about a possible recession.

But the figures could be skewed by the effects of Hurricane Beryl, warns Kevin Khang, senior international economist at Vanguard. It could mean a headline number that looks much worse than underlying factors say.

That makes conditions even more challenging for investors when investment prices are so high after markets have already rallied so much.

“The economy and overall the consumer is stretched, and we just don’t have a lot of wiggle room to react in an appropriate way if any geopolitical or any other unexpected risks materialize,” said Jeff Klingelhofer, portfolio manager at Thornburg Investment Management.

The S&P 500 would have dropped even more Thursday if not for Meta Platforms. Meta, the company behind Facebook and Instagram, climbed 4.1% after reporting profit and revenue for the latest quartre that topped analysts’ expectations.

Uncertainty was high heading into its report after other members of the highly influential group of stocks known as the “ Magnificent Seven ” had underwhelmed investors. This handful of Big Tech stocks drove the S&P 500 to dozens of records this year, in part on the frenzy around artificial-intelligence technology. But their momentum turned last month on worries investors had taken their prices too high and expectations had grown too difficult.

Other technology companies got a less welcome reception from investors. U.K. chip giant ARM Holdings delivered better profit and revenue for the latest quarter than expected, for example. But its U.S.-listed shares nevertheless tumbled 16.9%. It did not increase its forecasts for revenue and profit this fiscal year, despite its strong numbers to start it.

Amazon and Apple, which like Meta Platforms are also members of the “Magnificent Seven,” will report their latest results after trading finishes for the day. Apple dropped 2.1%, Amazon fell 2.3% and they were two of the heaviest weights on the S&P 500.

In the bond market, the yield on the 10-year Treasury slumped to 3.97% from 4.04% late Wednesday and from 4.70% in April.

Traders are largely convinced that the Federal Reserve will cut its main interest rate in September. The only question for them is how many times it may cut this year and next.

Across the Atlantic, the Bank of England cut interest rates for the first time since the onset of the COVID-19 pandemic in early 2020. Inflation in the U.K overall had already hit the bank’s target of 2%, something the U.S. central bank is still reaching for.

The FTSE 100 in London fell 1% after erasing an earlier gain, and stock indexes were also weaker across much of Europe and Asia.

Japan's Nikkei 225 fell 2.5%. A day earlier, the Bank of Japan raised interest rates, a move that helped push up the value of the yen against the U.S. dollar. Such swings can hurt the profits of exporters, and Toyota's stock tumbled 8.5% in Tokyo Thursday even though it reported a rise in profit.

AP Business Writers Yuri Kageyama and Matt Ott contributed.

People pass the New York Stock Exchange on Wednesday, July 31, 2024 in New York. Global stocks have advanced and oil prices jumped more than $2 a barrel after Hamas's top political leader died in an air strike.(AP Photo/Peter Morgan)

A pair of traders work at the post of specialist James Denaro, right, on the floor of the New York Stock Exchange, Wednesday, July 31, 2024. (AP Photo/Richard Drew)

A bank of television screens on the floor of the New York Stock Exchange, shows Federal Reserve Chairman Jerome Powell, Wednesday, July 31, 2024.(AP Photo/Richard Drew)

Specialist Michael Pistillo works on the floor of the New York Stock Exchange, Wednesday, July 31, 2024.(AP Photo/Richard Drew)

A television screen on the floor of the New York Stock Exchange, shows the Federal Reserve rate decision, Wednesday, July 31, 2024.(AP Photo/Richard Drew)

WASHINGTON (AP) — With President Joe Biden away from the White House, it was left Friday to another man with Oval Office experience to stand at the front of the Rose Garden and give a rousing call to service.

Martin Sheen and others from the cast of “The West Wing,” the hit drama about a liberal president and his staff, were invited by first lady Jill Biden for an event to mark the 25th anniversary of the show.

Sheen exhorted the crowd to find something worth fighting for, “something deeply personal and uncompromising, something that can unite the will of the spirit with the work of the flesh."

His voice and hands rose, his cadence matching perfectly that of President Jed Bartlet, the character Sheen played for seven seasons.

“When we find that, we will discover fire for the second time, and then we will be able to help lift up this nation and all its people to that place where the heart is without fear, and their head is held high,” Sheen said.

“The West Wing” remains a favorite of many who now work in Washington, both liberal and conservative. Among those spotted in the Rose Garden were House Foreign Affairs Chairman Michael McCaul, R-Texas, and Joe Walsh, once a tea party-aligned Illinois congressman who is now a sharp critic of former President Donald Trump and supporting Vice President Kamala Harris.

Asked to name his favorite character, Walsh replied, “I'm partial to Martin Sheen because I want to be president one day." (Walsh ran and lost a longshot Republican primary challenge to Trump in 2020.)

It was clear in the speeches and the party’s touches that at least a few “West Wing” fans work in the White House.

There was the U.S. Marine Band playing the opening notes to the show's theme as Biden and the cast walked out. There were references to “big blocks of cheese” — a show tradition of requiring staffers to meet with eccentric or offbeat characters — and the walk-and-talk dialogues in which characters moved through the halls at high speed.

Waiters passed out bourbon-and-ginger ale cocktails called “The Jackal,” a reference to press secretary C.J. Cregg's dance and lip sync routine in one iconic episode.

The show's creator, Aaron Sorkin, spoke after Sheen and referenced a bit of real-world politics: Biden's decision not to seek a second term after his disastrous debate performance. Sorkin was among the high-profile Democrats who called for him to withdraw, writing a column for The New York Times with a potential “script” for Democrats to replace Biden as their nominee with a Republican, Utah Sen. Mitt Romney.

His column ran on July 21, hours before Biden announced he would drop out.

“The fact is, ‘West Wing’ moments do happen,” he said Friday, addressing the first lady. “And Dr. Biden, we saw proof of that on the morning of July 21.”

Sorkin also recognized the cast members in attendance. Among them: Richard Schiff, who played communications director Toby Ziegler; Janel Moloney, who played assistant Donna Moss; and Dulé Hill, who played the president's bodyman, Charlie Young.

He noted the absence of a few high-profile actors — Allison Janney, who played Cregg, as well as Bradley Whitford and Rob Lowe — who he said were on set elsewhere.

“The rest of us are apparently unemployed,” he joked.

After the crowd laughed, a voice chimed in from Sorkin's right.

“Not yet!” Jill Biden said.

First lady Jill Biden, listens to actor Martin Sheen speaks at an event on the Rose Garden at the White House to mark the 25th anniversary of the television series, The West Wing, Friday, Sept. 20, 2024, in Washington. (AP Photo/Manuel Balce Ceneta)

First lady Jill Biden, with actor Martin Sheen, and other members of the cast of The West Wing, walk to the stage during an event on the Rose Garden at the White House marking the 25th anniversary of the television series, The West Wing, Friday, Sept. 20, 2024, in Washington. (AP Photo/Manuel Balce Ceneta)

Actress Christine Lahti, attends an event hosted by first lady Jill Biden on the Rose Garden at the White House to mark the 25th anniversary of the television series, The West Wing, Friday, Sept. 20, 2024, in Washington. (AP Photo/Manuel Balce Ceneta)

First lady Jill Biden, listens to Aaron Sorkin speak at an event on the Rose Garden at the White House to mark the 25th anniversary of the television series, The West Wing, Friday, Sept. 20, 2024, in Washington. (AP Photo/Manuel Balce Ceneta)

Actor Martin Sheen and other members of the cast of The West Wing, listen to Aaron Sorkin speak at an event on the Rose Garden at the White House to mark the 25th anniversary of the television series, The West Wing, Friday, Sept. 20, 2024, in Washington. (AP Photo/Manuel Balce Ceneta)

First lady Jill Biden, listens to actor Aaron Sorkin speaks at an event on the Rose Garden at the White House to mark the 25th anniversary of the television series, The West Wing, Friday, Sept. 20, 2024, in Washington. (AP Photo/Manuel Balce Ceneta)

First lady Jill Biden, listens to actor Martin Sheen speaks at an event on the Rose Garden at the White House to mark the 25th anniversary of the television series, The West Wing, Friday, Sept. 20, 2024, in Washington. (AP Photo/Manuel Balce Ceneta)

First lady Jill Biden, with actors Martin Sheen, left, Aaron Sorkin, right, and other members of the cast of The West Wing, is applauded as she hosts an event on the Rose Garden at the White House to mark the 25th anniversary of the television series, The West Wing, Friday, Sept. 20, 2024, in Washington. (AP Photo/Manuel Balce Ceneta)