Concerns Over a Slowing Economy
Wall Street Faces Sharp Decline Amid Economic Concerns
Biggest stock Movers Today
NEW YORK (AP) — U.S. stocks are experiencing a significant downturn on Tuesday, following a weak start to a week packed with critical economic updates.
The S&P 500 fell 1.4% in midday trading, heading towards its worst day in nearly a month, despite coming off a strong winning week that nearly pushed it to its all-time high. The Dow Jones Industrial Average dropped 436 points, or 1.1%, following its record close on Friday before the Labor Day holiday. Meanwhile, the Nasdaq Composite sank 2.3% by 11:45 a.m. Eastern time.
In the bond market, Treasury yields are also declining after a report revealed that U.S. manufacturing continued to shrink in August, weighed down by high interest rates. Manufacturing has been in contraction for most of the past two years, and August's performance was worse than economists had predicted.
"Demand remains subdued, as companies are reluctant to invest in capital and inventory due to current federal monetary policy and election uncertainty," said Timothy Fiore, chair of the Institute for Supply Management’s manufacturing business survey committee.
Concerns Over a Slowing Economy
Worries about a slowing U.S. economy previously triggered a sharp market decline early last month, but financial markets rebounded on optimism that the Federal Reserve could engineer a soft landing for the economy. After raising its main interest rate to its highest level in two decades to combat inflation, the Fed is now expected to ease rates later this month to support the economy and prevent a recession.
This week will bring additional economic reports that could clarify the extent of support the economy needs, including updates on job openings in late July and the growth of U.S. service businesses last month. The week’s highlight is expected on Friday with the release of the August jobs report.
According to analysts at Bank of America, the jobs report has become the stock market’s primary focus each month, taking precedence over inflation updates. Many traders anticipate that the Fed will implement a full percentage point of rate cuts this year, a level typically associated with recession, noted Gonzalo Asis and other economists in a BofA Global Research report.
Market Movers
Among the biggest losers on Wall Street was U.S. Steel, which fell 5.3% after Vice President Kamala Harris stated her opposition to the company’s proposed sale to Japan’s Nippon Steel. This echoes President Joe Biden's stance. Nippon Steel has committed an additional $1.3 billion for facility upgrades in Pennsylvania and Indiana, on top of an earlier $1.4 billion commitment, and expects to complete the transaction by year-end despite political and labor challenges.
Nvidia was the largest drag on the S&P 500, declining 7.2%. Despite exceeding high expectations for its recent profit report, the chipmaker's stock has struggled, potentially fueling criticism that Nvidia and other major tech stocks had soared too high amid Wall Street's enthusiasm for artificial intelligence technology.
Oil and gas companies also pulled the market lower as crude oil prices dropped roughly 4% amid concerns about global fuel demand. The price of U.S. benchmark crude oil has nearly returned to $70 per barrel, having dropped from over $85 in April. Exxon Mobil shares fell 2.3%, and ConocoPhillips declined 3%.
Not All Gloomy
Despite the overall downturn, more than a third of the stocks in the S&P 500 gained, particularly those benefiting from lower interest rates, including dividend-paying stocks and companies less affected by economic fluctuations, such as utilities and consumer staples manufacturers.
In the bond market, the yield on the 10-year Treasury decreased to 3.85% from 3.91% late Friday, a significant drop from the 4.70% peak in late April.
Global Markets React
Stock indexes across Europe and Asia also fell. Concerns about the strength of China's economy added to the global market pessimism, with recent data providing a mixed picture and weak earnings reports from Chinese firms, including property developer New World Development Co., exacerbating worries.
Wall Street's performance today highlights the market's sensitivity to economic data and the ongoing uncertainty surrounding the Federal Reserve's next moves. Investors are advised to stay vigilant as they navigate this volatile market environment.