U.S. stocks experienced significant declines on Tuesday, with major indexes like the S&P 500, Nasdaq Composite, and the Dow Jones Industrial Average facing their largest daily percentage drops since early August. This downturn occurred at the beginning of September, traditionally one of the stock market’s weakest months.
The market’s sentiment was dampened further by a report from the Institute for Supply Management which indicated that U.S. manufacturing activity was still subdued, showing only a modest improvement in August from a low in July. According to Jason Browne, president at Alexis Investment Partners in Montgomery, Texas, the poor performance is partly seasonal. “We had a weak ISM report come out this morning, but we do believe seasonality is a big factor here especially when you’ve had such a solid performance for the year until the end of last month,” Browne explained. He also noted the self-fulfilling prophecy of market pessimism in September, saying, “Everybody is reporting about how September is such a horrible month and that tends to feed on itself.”
Significant losses were seen among the ‘Magnificent Seven’ megacap technology stocks. For instance, Nvidia saw a near 10% drop, wiping $279 billion off its market cap, marking the largest single-day market value decline for a U.S. company. Other tech giants like Alphabet, Apple, and Microsoft also suffered losses.
The overall market saw the Dow fall 626.15 points (1.51%), the S&P 500 drop 119.47 points (2.12%), and the Nasdaq Composite decline by 577.33 points (3.26%). The CBOE Volatility Index, which measures market expectations of volatility, surged 33.2% to 20.72, its highest close since early August.
Looking ahead, market participants are anticipating several key labor market reports and the Federal Reserve’s next meeting on September 17-18, with high hopes for an interest rate cut. Market odds favor a 25-basis point cut at 63%, with a 37% chance for a more substantial 50 basis point reduction, according to the CME Group’s FedWatch Tool.
In other news, Tesla’s stock fell 1.6% following reports of its plans to produce a new six-seat variant of the Model Y in China, while Boeing shares dropped 7.3% after a downgrade by Wells Fargo. On the trading floors, decliners significantly outnumbered advancers on both the NYSE and Nasdaq.