NEW YORK — U.S. stock markets are experiencing a downturn on Tuesday, reflecting concerns over a weak economic outlook as the week kicks off with crucial economic updates.
The S&P 500 index fell by 1.3% during morning trading after a strong performance last week that had it near an all-time high. The Dow Jones Industrial Average dropped 502 points, or 1.2%, retreating from its recent record set before the Labor Day holiday. The Nasdaq composite was down 1.7% by 10:15 a.m. Eastern time.
In the bond market, Treasury yields are declining following the release of a report indicating that U.S. manufacturing shrank again in August. This downturn is attributed to persistent high interest rates affecting production. Manufacturing has been contracting for nearly two years, and the August figures fell short of economists’ expectations.
“Demand remains subdued, as companies exhibit hesitancy to invest in capital and inventory amid current federal monetary policy and election uncertainties,” stated Timothy Fiore, chair of the Institute for Supply Management’s manufacturing business survey committee.
Concerns over a slowing U.S. economy contributed to volatility in stock markets last month. Financial markets later recovered, driven by hopes that the Federal Reserve could achieve a balanced economic transition. Following its decision to raise interest rates to a two-decade high to combat inflation, the Fed is anticipated to ease rates later this month to avert a recession.
Several reports are expected this week that will give further insight into the economy’s needs, including job openings and growth in U.S. services from last month. The highlight of the week will likely be released on Friday, detailing job creation figures for August.
The monthly jobs report has become a focal point for the stock market, surpassing inflation updates in importance, according to analysts. Expectations have risen among traders that the Fed may enact a full percentage point cut to interest rates this year, which analysts consider significant enough to indicate a potential recession.
On Wall Street, U.S. Steel saw a 3.3% drop following opposition from Vice President Kamala Harris regarding the company’s planned sale to Japan’s Nippon Steel. This came after Nippon Steel announced an additional $1.3 billion investment to upgrade facilities in Pennsylvania and Indiana.
Despite the political and labor resistance, Nippon Steel maintains its expectation that the transaction will finalize in the latter half of 2024.
Meanwhile, Nvidia experienced the most substantial decline on the S&P 500, plunging 6%. This dip comes despite the company exceeding profit expectations in its latest report, fueling concerns that the stock, along with other major tech companies, may be overvalued amid the surge in artificial intelligence technology investments.
In bond trading, the yield on the 10-year Treasury decreased to 3.83% from 3.91%, a notable decline from 4.70% observed in late April, highlighting shifts in the bond market.
Internationally, stock markets in Europe and Asia are also trending lower, reflecting growing apprehension regarding the stability of China’s economy, accentuated by mixed economic data and disappointing earnings reports from major Chinese companies, including property developer New World Development Co.
