September kicked off on a shaky footing for Wall Street, as key indices experienced a decline due to economic data that sparked new worries about the overall health of the economy.
Following the Labor Day holiday on Monday, trading took a downturn, with the Dow Jones plummeting by more than 600 points. The S&P 500 also experienced a significant drop, falling over 2%. The Nasdaq Composite faced the steepest decline, closing 3.3% lower. This marked the most challenging day for all three indices since the global market sell-off on August 5, from which they had previously rebounded sharply.
The recent sell-off hit chip stocks the hardest, with Nvidia experiencing a staggering drop of more than 9% in its shares. Other major players like Micron, KLA, and AMD also faced significant losses. The VanEck Semiconductor ETF plummeted by over 7%, while the IT sector of the S&P 500 recorded its most substantial single-day decline since September 2022.
The S&P 500 and Nasdaq experienced their most challenging beginnings to September since 2015 and 2022, respectively
Historically, September has proven to be the most difficult month for the S&P 500, averaging the worst performance over the past decade.
Recent reports on manufacturing production, published on Tuesday, indicated a troubling trend. The S&P Global report revealed a drop from July to August, and the ISM report fell short of economists’ expectations. This suggests a potential slowdown in the manufacturing sector that warrants attention.
Larry Tentarelli, chief technical strategist at the Blue Chip Trend Report, remarked that the current market is highly reactive to incoming data. “We have transformed into a market that relies heavily on data,” he stated.
JPMorgan Chase & Co. strategists indicated earlier this week that the equity-market rally could falter as it approaches record highs, even if the Federal Reserve embarks on a much-anticipated cycle of rate cuts. Mislav Matejka and his team emphasized that any easing of policy would be a reaction to decelerating growth, characterizing it as a “reactive” reduction.
Matejka emphasized in a recent note that we are still facing significant challenges. He expressed a strong inclination towards defensive sectors, especially given the recent decline in bond yields. The current sentiment and positioning indicators remain unappealing, and the levels of political and geopolitical uncertainty are notably high. Additionally, September brings its own set of seasonal difficulties that we must navigate carefully.
Since 1950, September has consistently been the month with the largest percentage decline for the S&P 500, as noted by the Stock Trader’s Almanac. Additionally, a contrarian sentiment indicator from Bank of America Corp. reached its highest point in almost two and a half years last month, edging nearer to a potential “sell” signal for U.S. equities.
The highly anticipated US Jobs report, scheduled for release this Friday, is drawing significant interest from all corners.
Analysts polled by Bloomberg expect the August employment report to show a rise of around 165,000 jobs in the world’s largest economy.
Although July saw a modest addition of 114,000 jobs, the average payroll growth for the past three months is projected to drop to just above 150,000, representing the slowest pace since early 2021. Furthermore, it is anticipated that the unemployment rate experienced a slight decline in August, decreasing from 4.3% to 4.2%.