Wall Street Slumps Amid Economic Concerns and Weak Manufacturing Data

Wall Street experienced a significant decline on Tuesday, marking its worst day since the early August sell-off. The downturn was fueled by a weak start to the week, which included disappointing economic updates.

The S&P 500 fell by 2.1%, erasing a portion of the gains from a three-week rally that had brought it close to its all-time high. The Dow Jones Industrial Average dropped 626 points, or 1.5%, from its record set on Friday before the Labor Day holiday. The Nasdaq Composite saw an even steeper decline of 3.3%, led lower by major tech stocks like Nvidia.

Major Wall Street Stocks Decline Amid Economic Worries

The bond market also faced turbulence, with Treasury yields slipping after a report revealed a contraction in U.S. manufacturing for August. This sector has been struggling for most of the past two years, with August’s performance falling short of economists’ expectations.

Timothy Fiore, chair of the Institute for Supply Management’s manufacturing survey committee, highlighted subdued demand and reluctance among companies to invest due to current federal monetary policy and election uncertainty.
Oil and gas stocks were among the hardest hit, reflecting concerns about the impact of a fragile global economy on fuel consumption. Crude oil prices fell roughly 4%, bringing a barrel of benchmark U.S. oil close to $70—down from over $85 in April. Exxon Mobil and ConocoPhillips saw losses of 2.1% and 3.5%, respectively.

Focus Shifts to Upcoming Jobs Report and Federal Reserve Actions

This recent sell-off echoes the broader concerns that led to a notable drop in early August, where the S&P 500 had briefly fallen nearly 10% from its July record. However, Wall Street had rebounded on hopes that the Federal Reserve could manage a smooth economic transition.

The Fed is expected to lower interest rates later this month to support economic conditions and avoid a recession after previously raising rates to combat high inflation.

Upcoming economic reports, including updates on job openings and service sector growth, are expected to provide further insights. The key focus will be on Friday’s jobs report, which analysts at Bank of America have noted is now a crucial event for the stock market.

The size of the Federal Reserve’s anticipated rate cut may hinge on this report’s findings. If hiring shows improvement over July’s figures, the Fed may implement a standard quarter-point cut. Conversely, weaker data could prompt a more substantial half-point reduction.
Despite the Wall Street market, some sectors saw gains. Nearly 30% of S&P 500 stocks advanced, particularly those that benefit from lower interest rates, such as dividend-paying stocks and companies less sensitive to economic fluctuations.

In the bond market, the yield on the 10-year Treasury note fell to 3.84% from 3.91% late Friday, reflecting a notable shift from the 4.70% seen in late April. International markets also showed declines, with European and Asian indexes lower.

Additionally, concerns about China’s economic resilience grew, as recent data and weak earnings reports from Chinese firms, including property developer New World Development Co., heightened pessimism about the global economic outlook.

Overall, the S&P 500 dropped 119.47 points to 5,528.93, the Dow fell 626.15 to 40,936.93, and the Nasdaq Composite decreased by 577.33 to 17,136.30.

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