NEW YORK — U.S. stocks fell Tuesday, hitting their worst level since the early August plunge, as a week full of economic updates got off to a discouraging and weak start.
THEThe P&P 500 index fell 2.1%, taking back some of the gains from a three-week winning streak that had taken it to the brink of an all-time high. The Dow Jones Industrial Average fell 626 points, or 1.5%, from its own record set Friday ahead of Monday’s Labor Day holiday. The Nasdaq Composite fell 3.3%, with Nvidia and other Big Tech stocks leading the way lower.
Treasury yields also fell in the bond market after a report showed that the U.S. manufacturing sector contracted again in August, weighed down by high interest rates. The manufacturing sector has been contracting for nearly two years and its performance in August was worse than economists had expected.
People walk past the entrance to the Wall Street subway station on Tuesday, September 2, 2024, in New York City.
AP Photo/Peter Morgan
“Demand remains subdued as businesses are reluctant to invest in capital and inventory given current federal monetary policy and election uncertainty,” said Timothy Fiore, chairman of the Institute for Supply Management’s Manufacturing Survey Committee.
Oil and gas stocks were among the market’s biggest losers after crude prices fell about 4% on concerns about how much fuel a fragile global economy will burn. Benchmark U.S. oil is nearly back to $70 a barrel and down on the year after topping $85 in April.
Exxon Mobil lost 2.1% and ConocoPhillips 3.5%.
Similar concerns about a slowing U.S. economy and a possible recession helped send stocks tumbling in early August. That briefly sent the SThe P 500 index is nearly 10% below its record high set in July, but financial markets have quickly rebounded on hopes that the Federal Reserve can achieve a perfect landing for the economy.
The Fed appears set to cut interest rates later this month in hopes of easing economic conditions and avoiding a recession after previously raising its key interest rate to its highest level in two decades to combat high inflation.
Other reports due later this week could show the extent of the need for aid in the economy, including updates on the number of job openings posted by U.S. employers at the end of July and the strength of growth at U.S. services companies last month. The highlight of the week will likely be Friday, when a report will show how many jobs U.S. employers created in August.
The jobs report has once again become the main event of the month in stock markets, trumping inflation figures, according to Bank of America analysts. Many traders expect the Fed to cut interest rates by 1 percentage point this year, which is a “recession-sized” amount, Gonzalo Asis and other economists and strategists wrote in a report from BofA Global Research.
The strength of this jobs report, or lack thereof, will likely determine the size of the Fed’s next rate cut, according to David Mericle, an economist at Goldman Sachs. If Friday’s data shows an improvement in hiring from July’s disappointing report, that could keep the Fed on track for a traditional quarter-percentage-point rate cut.
But if Friday’s report is weaker, it could prompt the Fed to make a disproportionate half-percentage-point cut from the current range of 5.25% to 5.50% for the federal funds rate, Mericle said.
While rate cuts are generally beneficial for investment prices, a recession could more than wipe out that benefit by depressing corporate profits.
On Wall Street, U.S. Steel fell 6.1% in early trading after Vice President Kamala Harris said Monday she opposed the company’s proposed sale to Japan’s Nippon Steel. The Democratic presidential candidate’s comments, which echo President Joe Biden’s stance, come after Nippon Steel Corp. said last week it would spend an additional $1.3 billion to upgrade its facilities in Pennsylvania and Indiana, on top of a previous commitment of $1.4 billion.
Nippon Steel also reiterated that it expected the transaction to be completed by the end of this year, despite continued political and labor opposition.
Nvidia was by far the heaviest weight on the S&P 500 after falling 9.5%. Its stock struggled even after the chipmaker beat lofty expectations for its latest earnings report. The muted performance could reinforce criticism that Nvidia and other Big Tech stocks have simply climbed too high in Wall Street’s frenzy over artificial intelligence technology.
All the actions known as the “Magnificent Seven”, which represented the vast majority of the actions of the SThe &P 500’s return last year and early this year fell at least 1.3%.
Yet it was not a total failure on Wall Street. Nearly 30% of the SThe P 500 index rose, led by stocks that tend to benefit most from lower interest rates. That includes dividend-paying stocks, as well as companies whose earnings are less closely tied to the ebb and flow of the economy, such as real estate stocks and consumer goods makers.
In total, the SThe P 500 index fell 119.47 points to 5,528.93 points. The Dow Jones lost 626.15 points to 40,936.93 points and the Nasdaq Composite lost 577.33 points to 17,136.30 points.
In the bond market, the yield on the 10-year Treasury note fell to 3.84% from 3.91% late Friday. That’s down from 4.70% in late April, and is a significant development for the bond market.
On foreign stock markets, indices were down across much of Europe and Asia.
Concerns about the resilience of China’s economy have also grown, with recently released data showing a mixed picture. Disappointing results from Chinese companies, including real estate developer and investor New World Development Co., added to the pessimism.
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AP Business reporters Yuri Kageyama and Matt Ott contributed to this report.
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