NEW YORK — U.S. stocks are experiencing declines on Tuesday after a disappointing start to a week filled with economic updates.
The S&P 500 was down 1.4% during midday trading, heading for its worst performance in nearly a month after a solid week that brought it close to its all-time high. The Dow Jones Industrial Average fell by 436 points, or 1.1%, compared to its record high set on Friday prior to the Labor Day holiday. The Nasdaq composite saw a more significant drop, down 2.3% as of 11:45 a.m. Eastern time.
Manufacturing Slowdown Affects Market
Treasury yields decreased in the bond market following a report indicating that U.S. manufacturing continued to decline in August, impacted by elevated interest rates. Manufacturing has generally been contracting for nearly two years, with August’s performance proving to be worse than economists had anticipated.
“Demand remains weak, as companies are hesitant to invest in capital and inventory due to current federal monetary policy and uncertainties surrounding the election,” commented Timothy Fiore, chair of the Institute for Supply Management’s manufacturing business survey committee.
Economic Concerns and Federal Reserve Outlook
Fears regarding a slowing U.S. economy contributed to a turbulent decline in stocks early last month. However, markets later rebounded, fueled by optimism that the Federal Reserve could achieve a favorable outcome for the economy. The Fed recently raised its main interest rate to a two-decade high to combat inflation, but indications suggest it may ease rates later this month to support the economy and prevent a recession.
Additional reports coming later this week are expected to provide insight into the economy’s needs, including data on job openings advertised by U.S. employers in late July, as well as growth figures for U.S. services businesses in the past month. The focal point of the week will likely be released on Friday, detailing the number of jobs created by U.S. employers in August.
According to analysts at Bank of America, the jobs report has once again become the focal point for the stock market, overtaking inflation updates. Many traders anticipate that the Fed may implement a total of one percentage point in interest rate cuts this year, which would be a significant response to recessionary pressures, according to economists and strategists at BofA Global Research.
Significant Stock Changes
On Wall Street, U.S. Steel experienced a 5.3% decrease following Vice President Kamala Harris’s Monday statement opposing the company’s planned sale to Japan’s Nippon Steel. Her remarks aligned with President Joe Biden’s stance and emerged after Nippon Steel announced last week an additional $1.3 billion investment to upgrade facilities in Pennsylvania and Indiana, following a previous commitment of $1.4 billion.
Despite this, Nippon Steel reiterated its expectation to finalize the transaction by the end of the year, despite ongoing political and labor resistance.
Nvidia emerged as the largest detractor on the S&P 500, plummeting 7.2%. This decline is notable even after the chipmaker exceeded high profit expectations. Concerns continue regarding whether Nvidia and other major technology stocks are overvalued following the surge associated with investments in artificial intelligence technology.
Stocks in the oil and gas sectors also contributed to the market’s decline, as crude oil prices fell approximately 4%, raising concerns about global fuel demand. A barrel of benchmark U.S. oil is nearing $70, reflecting a dip for the year after previously exceeding $85 in April.
Exxon Mobil dropped 2.3%, while ConocoPhillips fell by 3%.
Nonetheless, it was not a complete downturn on Wall Street. More than a third of the stocks in the S&P 500 saw gains, particularly those benefiting from lower interest rates, such as dividend-paying stocks and companies less affected by economic fluctuations, including 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, marking a notable drop from the 4.70% rate in late April.
In international markets, indexes across much of Europe and Asia faced declines as well, amid growing concerns over the resilience of China’s economy. Recent data indicates a mixed economic picture, compounded by weak earnings reports from Chinese firms, including property developer New World Development Co.