U.S. stock markets are experiencing a downturn on Tuesday, following a lackluster economic update that marks the beginning of a week filled with important economic reports.
In midday trading, the S&P 500 dropped 1.4%, heading toward its worst performance in almost a month after a positive week that nearly brought it to its all-time high. The Dow Jones Industrial Average fell by 436 points, or 1.1%, from its record high set on Friday before the Labor Day holiday. The Nasdaq composite saw an even steeper decline, down 2.3% as of 11:45 a.m. Eastern time.
Treasury yields declined in the bond market after a report indicated a further contraction in U.S. manufacturing for August, a sector that has struggled under persistent high interest rates. Manufacturing has struggled for most of the past two years, and August’s figures fell short of economists’ expectations.
“Companies are hesitant to invest in capital and inventory due to current federal monetary policy and uncertainties around the upcoming elections,” commented Timothy Fiore, chair of the Institute for Supply Management’s manufacturing business survey committee.
Concerns about a slowing U.S. economy had previously triggered a market downturn in early August, but markets later bounced back on hopes for a stable economic outlook. The Federal Reserve, after raising its benchmark interest rate to a two-decade high to combat inflation, appears ready to consider interest rate cuts later this month to help support the economy and avert a recession.
In the coming days, reports will provide further insight into the economy’s needs, including data on job openings from July and growth in U.S. services businesses for August. The most significant report will likely be released on Friday, detailing job creation figures for August.
Analysts at Bank of America note that the monthly jobs report has taken center stage in the stock market, overtaking inflation updates in significance. Many traders are predicting that the Federal Reserve will implement substantial interest rate cuts this year.
On Wall Street, U.S. Steel’s stock dropped 5.3% after Vice President Kamala Harris voiced her opposition to the company’s proposed sale to Japan’s Nippon Steel. Her comments align with President Joe Biden’s stance, following Nippon Steel’s announcement of a significant investment in its Pennsylvania and Indiana facilities.
Nippon Steel, meanwhile, maintains its expectation of finalizing the deal by the end of the year, despite ongoing political and labor challenges.
Nvidia also faced significant losses, dropping 7.2%, even after surpassing profit forecasts. This decline has raised questions about the inflation of tech stock valuations related to artificial intelligence.
The decline in stock markets was further exacerbated by a nearly 4% drop in crude oil prices, reflecting concerns about global fuel demand. U.S. oil prices are close to $70 a barrel, having fallen after peaking above $85 in April. Oil giants Exxon Mobil and ConocoPhillips saw their stocks fall by 2.3% and 3%, respectively.
Despite the overall market decline, over one-third of S&P 500 stocks gained in value, particularly those benefiting from lower interest rates, such as dividend-paying stocks and companies less affected by economic fluctuations.
In the bond market, the yield on the 10-year Treasury note fell to 3.85% from 3.91% on Friday, down from 4.70% in late April, indicating a notable shift.
Internationally, stock indexes also fell across much of Europe and Asia, as concerns intensified regarding China’s economic resilience due to mixed economic data and disappointing earnings reports from Chinese firms, including property developer New World Development Co.