Major U.S. stock indexes plummeted on Monday due to recession worries, compounded by Berkshire Hathaway's reduction in its Apple stake. Despite a slight rebound from U.S. service sector activity, technology shares like Nvidia, Microsoft, and Alphabet dropped. Treasury yields hit a year-low, indicating a potential economic downturn.

Major U.S. stock indexes ended sharply lower on Monday as recession worries swept global markets and drove investors away from risky assets. Apple shares plunged following Berkshire Hathaway's decision to cut its stake in the company, adding to the concerns.

The losses were slightly offset in the late morning when U.S. services sector activity showed signs of recovery in July, driven by a rise in orders and employment. Despite this, shares of tech giants Nvidia, Microsoft, and Alphabet slid. The Cboe Volatility index, Wall Street's fear gauge, spiked significantly.

Portfolio manager Neville Javeri noted the market's sell-off was an extension of last week's anxiety, initially triggered by weak jobs data, raising fears that the Fed may need to take more proactive measures on unemployment. Preliminary data revealed substantial drops in major indexes, exacerbated by broader economic concerns and disappointing forecasts from big U.S. tech companies.

U.S. Treasury yields fell to their lowest levels in a year, and the gap between two- and 10-year Treasury notes turned positive, suggesting a potential economic downturn. Traders are now highly expecting a 50 basis point cut in benchmark rates by the Fed in September. Separately, Pringles maker Kellanova saw shares soar amid speculation of a buyout by Mars.

By Caroline Valetkevitch

NEW YORK (Reuters) - Major U.S. stock indexes ended sharply lower on Monday as U.S. recession worries shook global markets and drove investors out of risky assets, while Apple shares dropped as Berkshire Hathaway cut its stake in the company.

The recession concerns followed weak economic data last week, including Friday's soft U.S. payrolls report.

Indexes pared losses in late morning after data showed U.S. services sector activity in July rebounded from a four-year low amid a rise in orders and employment.

Shares of Apple fell after Berkshire Hathaway halved its stake in the iPhone maker. Billionaire investor Warren Buffett also let cash at Berkshire soar to $277 billion.

Nvidia, Microsoft, and Alphabet also slid, while the Cboe Volatility index, Wall Street's fear gauge, rose sharply. Chicago Fed President Austan Goolsbee downplayed recession fears, but said Fed officials need to be cognizant of changes in the environment to avoid being too restrictive with interest rates.

Today we're seeing a sell-off as an extension of that anxiety that was felt last week, said Neville Javeri, portfolio manager and head of the Empiric LT Equity team at Allspring in Washington. It started off with the jobs data last week, and it clearly led to the belief that the Fed needs to start being more proactive around where those unemployment numbers are going, he said.

According to preliminary data, the S&P 500 lost 159.20 points, or 2.98%, to end at 5,187.36 points, while the Nasdaq Composite lost 567.78 points, or 3.38%, to 16,208.38. The Dow Jones Industrial Average fell 1,030.47 points, or 2.59%, to 38,706.79.

The weak jobs report and shrinking manufacturing activity in the world's largest economy added to worries following recent disappointing forecasts from the big U.S. technology companies. The Nasdaq Composite on Friday confirmed it was in correction territory.

The so-called Magnificent Seven group of stocks has been the main driver for the indexes hitting record highs this year.

Traders also attributed some weakness in stocks to unwinding of sharp positions of carry trades, where investors borrow money from economies with low interest rates such as Japan or Switzerland to fund their bets in high-yielding assets elsewhere.

The Dow Jones Industrial Average slipped 2.48%, the S&P 500 shed 2.85%, and the Nasdaq Composite plunged 3.36%, marking a tough day for markets. Apple shares dropped 4.4% after Warren Buffett's Berkshire Hathaway halved its stake, adding to the downward pressure. The sell-off wasn't limited to Apple: Nvidia slid over 6%, Microsoft fell 3.4%, and Alphabet lost 2.5%. These moves followed weak economic data from last week, though some optimism came from positive U.S. services sector activity in July. The CBOE Volatility Index, or fear gauge, spiked, indicating heightened market anxiety. Meanwhile, U.S. Treasury yields hit their lowest levels in a year, with a notable positive shift between two- and 10-year Treasury notes -- a classic recession signal.

The dramatic fall in major stock indexes suggests investors are bracing for a potential economic downturn. The sharp decline in tech stocks, which have been key drivers of market gains this year, underscores the market's fragile sentiment. Traders are now betting on a near-certain rate cut by the Federal Reserve, reflected by a 92.5% probability of a 50 basis point cut in September, according to CME's FedWatch Tool. However, opportunities still exist, as seen with companies like Kellanova soaring over 15% on buyout speculation.

The bigger picture: Global economic shifts on the horizon.

The latest market moves highlight the interconnectedness and sensitivity of global economies. The inversion of the U.S. Treasury yield curve and the spike in the fear gauge point to widespread economic anxiety. With recession fears driven by weak payroll reports and shrinking manufacturing activity, the Federal Reserve faces the challenge of balancing interest rates without stifling growth. Any misstep could have significant implications not just for the U.S., but for global financial stability, affecting international trade and economic policies.