Topline
U.S. stock indexes staggered toward their worst day in weeks, with losses from trillion-dollar technology companies like Nvidia propelling the decline as lingering concerns about global economic growth weighed on commodity and equity prices alike.
Traders work on the floor of the New York Stock Exchange last month.
Key Facts
All three major U.S. stock indicators suffered easily their steepest declines since Aug. 5’s crash sparked by global slowdown angst.
The benchmark S&P 500 declined 2.1% in September’s first day of trading, while the bluechip Dow Jones Industrial Average sank 1.5%, or 626 points, and the tech-concentrated Nasdaq tanked 3.3%.
Driving Wall Street’s negative attitude was a morning report from the Institute for Supply Management, which revealed lighter manufacturing activity in the U.S. than forecasted in July, accelerating investors’ growth worries as the report can forewarn a broader weakening in economic activity, and investors also broadly positioned for a month which has been poor for stocks this decade.
Worst hit by the risk-off selloff were big technology companies often considered more sensitive to economic slowdowns given their elevated valuations.
Shares of the U.S.’ six tech firms with market capitalizations over $1 trillion each declined more than 1%, led by artificial intelligence kingpin Nvidia’s 8% dive and iPhone maker Apple’s 3% drop, knocking out roughly $280 billion in market value for Nvidia and about $95 billion for Apple.
Surprising Fact
The stock slump, particularly modest considering the S&P has returned a blistering 19% year-to-date, evokes some less than stellar memories of Septembers past. The leading U.S. index fell 3.9% in Sept. 2020, 4.8% in Sept. 2021, 9.3% in Sept. 2022 and 4.9% in Sept. 2023, working out to an average decline of 5.7% for the S&P in the month over the last four years.
Why Are Oil Prices Down?
Oil prices fell to their lowest level this year earlier Tuesday, as international oil benchmark Brent Crude fell almost 5% to below $74 per barrel by midmorning, registering its lowest price since Dec. 13, 2023, according to MarketWatch data. The slump came after top oil importer China reported its fourth straight month of manufacturing declines and ahead of a slew of economic data in the U.S., including August’s jobs report slated for Friday, a release which last month briefly sparked fears of an impending U.S. recession. Further driving concerns about China’s economic growth, and its related impact on global oil demand, was a Bank of America note warning about the “sputtering” Chinese economy’s weakening growth prospects, as BofA economists Claudio Irigoyen and Antonio Gabriel cut their forecast Tuesday for China’s 2024 gross domestic product growth from 5% to 4.8% and for 2025 and 2026 economic growth from 5% to 4.8% apiece. “Demand worries linked to the threat of a slowdown in global growth are acting as the biggest influence on the oil market right now,” remarked Sevens Report analyst Tom Essaye in a Tuesday note to clients.
Key Background
Though lower crude oil prices are often a welcome development for consumers as they front run lower gasoline prices for drivers, they can be a bad omen for the broader economy as it indicates prospects of a broader slowdown as companies, consumers and governments tighten their belts. Brent crude prices fell 62% in 2008, during the global financial crisis, and 24% in 2020, amid the dredges of the COVID-19 pandemic. Americans are already paying less at the pump than they did in the recent past, with Tuesday’s average gas prices of $3.33 per gallon down from $3.48 a month ago and $3.82 a year ago, according to AAA, helping push inflation down.
What To Watch For
Other than the most pressing issue of economic growth, financial markets also are calibrating to November’s closely contested U.S. presidential election. “Given the pretty divergent proposals from the two candidates, this election is going to be one of the biggest issues for markets over the next two months,” Deutsche Bank strategist Jim Reid remarked to clients Tuesday.