\”Investors began September trading with a thud as stocks tumbled on Tuesday to start a historically tough month for markets, with AI darling Nvidia (NVDA) and chip names leading tech stocks down. The turn into the red comes amid a crucial week of data on the economy and labor market highlighted by an influential monthly jobs report.
The Dow Jones Industrial Average (^DJI) slid 1.5%, or over 600 points. The S&P 500 (^GSPC) dropped 2.1%, while the tech-heavy Nasdaq Composite (^IXIC) pulled back 3.3%.
Stocks are retreating from near highs as Wall Street hunkers down after a rollercoaster August, with the prospect of a potentially stormy September ahead. Investors are assessing the risk of data shocks or presidential race surprises in a month that’s typically terrible for traders.
Nvidia (NVDA) fell almost 10% Tuesday, as investors continue to withdraw following a lackluster earnings report and lingering questions about the future of the AI trade. Other chip stocks fell in tandem, with Broadcom (AVGO), Qualcomm (QCOM), and Taiwan Semiconductor Manufacturing Company (TSM) all down more than 6%.
Also top of mind is the August jobs report, due out on Friday, which could influence how deeply the Federal Reserve cuts interest rates at its meeting this month. With inflation now cooling, policymakers are on alert for the labor market to fall into place.
For investors, the focus is on whether the signs of slowing in the July jobs report were overstated — or an early warning of a broader slowdown. Any hints of stress should put pressure on the Fed to make a bigger reduction in rates. As of Tuesday, traders were pricing in 39% odds of a 50 basis point cut instead of 25 basis points, per the CME FedWatch Tool.
A measure of US manufacturing ticked up last month, according to fresh figures from the Institute for Supply Management (ISM). But the metric reflected slowed factory activity, with a reading below a threshold that suggests a contraction in the manufacturing sector.