U.S. stocks experienced a downturn on Tuesday as investors reacted to a weak kick-off to a week filled with economic reports.
The S&P 500 index dropped 1.4% during midday trade and was on pace for its worst performance in nearly a month following a successful previous week that brought it close to its all-time high. The Dow Jones Industrial Average fell by 436 points, or 1.1%, from its record established on Friday ahead of the Labor Day holiday. Meanwhile, the Nasdaq composite saw a decline of 2.3% around 11:45 a.m. Eastern time.
In the bond market, Treasury yields decreased following a report indicating that U.S. manufacturing continued to contract in August, pressured by high interest rates. This sector has struggled for much of the past two years, and August’s performance fell short of economists’ expectations.
Timothy Fiore, chair of the Institute for Supply Management’s manufacturing business survey committee, noted that demand remains weak as companies are hesitant to invest in capital and inventory due to prevailing federal monetary policies and uncertainty surrounding the upcoming elections.
Concerns regarding a slowing U.S. economy had previously contributed to a significant market decline last month, but stocks rebounded on hopes that the Federal Reserve might manage a smooth economic transition. After raising its primary interest rate to a two-decade high to combat inflation, the Fed is poised to lower rates in the coming weeks to support the economy and avoid a recession.
This week, additional reports are expected, including job openings from U.S. employers at the close of July and growth figures for U.S. service businesses in August. Friday’s job report is anticipated to be a key indicator of economic health and has taken precedence over updates on inflation, according to analysts from Bank of America. Many traders predict that the Fed may implement a full percentage point cut to interest rates this year, which is viewed as a substantial reduction.
In corporate news, U.S. Steel shares fell 5.3% after Vice President Kamala Harris expressed opposition to the company’s planned sale to Japan’s Nippon Steel. Her remarks mirrored President Biden’s stance and followed Nippon Steel’s announcement of additional investments in Pennsylvania and Indiana.
Despite facing challenges, Nippon Steel remains optimistic that the deal will close by year’s end, despite continued political and labor resistance.
Nvidia suffered the most significant impact, plummeting 7.2% despite exceeding profit expectations, raising concerns over the stock’s valuation amid the AI investment surge.
Oil and gas stocks also contributed to the market decline as crude oil prices dropped about 4%, with benchmark U.S. oil nearing $70, reflecting a decrease since it surpassed $85 in April. Exxon Mobil fell 2.3%, while ConocoPhillips declined by 3%.
Nonetheless, not all news was negative on Wall Street, as over one-third of S&P 500 stocks rose, particularly those benefiting from lower interest rates, including dividend-paying and defensive consumer goods stocks.
In the bond market, the yield on the 10-year Treasury decreased to 3.85% from 3.91% late Friday, down from 4.70% in late April, indicating significant movement in the bond sector.
Internationally, stock indexes were down across most of Europe and Asia, coupled with growing concerns about the health of China’s economy, which presented a mixed economic outlook along with disappointing earnings reports from Chinese firms.