September has started on a challenging note for Wall Street, with the S&P 500 and Nasdaq Composite both experiencing back-to-back declines amid a turbulent market environment. Despite some resilience in the Dow Jones Industrial Average, investor sentiment remains fragile due to recent weakness in semiconductor stocks and broader economic concerns. A temporary normalisation of the US Treasury yield curve, which had been inverted and signalling recession fears, provided some relief to the markets. However, the sharp pullback in tech shares, particularly in companies like Nvidia, reflects growing caution among traders as they brace for upcoming economic data releases. This mixed market performance underscores the ongoing tension between hopes for economic recovery and concerns over slowing growth.

Key Takeaways:

  • S&P 500 and Nasdaq Fall Amid Market Uncertainty: The S&P 500 dropped 0.16% to finish at 5,520.07, marking its second consecutive day of losses. The Nasdaq Composite also declined, losing 0.3% to close at 17,084.30, reflecting continued investor caution as September begins.
  • Dow Jones Manages Modest Gains: The Dow Jones Industrial Average posted a slight gain, rising 38.04 points or 0.09% to end at 40,974.97. This uptick was seen as an outlier amid overall market volatility.
  • European Markets Slide as Tech Stocks Lead Losses: European stocks closed sharply lower, with the pan-European Stoxx 600 index dropping 1%. Technology stocks led the decline, falling 3.2%, as market concerns mirrored those on Wall Street. The FTSE 100 decreased by 0.35% to 8,269.60, the CAC 40 fell by 1.03%, led by declines in LVMH (-4.19%) and Hermes International (-3.58%), and the DAX dropped by 0.81%. The sell-off was broad-based, affecting most sectors.
  • Asia-Pacific Markets Hit Hard Amid Tech Sell-Off: Asia-Pacific markets suffered significant losses, mirroring the sell-off in US tech stocks. Japan’s Nikkei 225 plunged 4.24% to 37,047.61, marking its worst day since early August, with major losses in semiconductor stocks such as Renesas Electronics (-8.50%) and Tokyo Electron (-8.55%). Taiwan’s Taiex led the region’s losses, falling 4.52% to 21,092.75, with Taiwan Semiconductor Manufacturing Company dropping 5.21%. Other major indices such as South Korea’s Kospi and Australia’s S&P/ASX 200 also saw declines, down 3.15% and 1.88%, respectively.
  • Oil Prices Continue to Slide: US crude oil prices fell below $70 per barrel for the first time in nine months, hitting a session low of $68.83. This drop comes amid uncertainty over future OPEC+ production decisions and concerns about weakening global demand. The West Texas Intermediate October contract declined by 2.10% to $68.84 per barrel, while the Brent November contract fell by 1.87% to $72.36 per barrel, erasing all gains for the year and signalling a bearish outlook for oil markets.
  • PMI Data Shows Mixed Economic Signals in Europe: The latest PMI data revealed a mixed economic outlook across Europe. In the UK, the Services PMI rose to 53.7 in August from 52.5 in July, indicating a strengthening service sector and easing price pressures. Meanwhile, France’s Services PMI surged to 55.0, its highest level since May 2022, driven by demand related to the upcoming Olympics. However, Germany’s Services PMI declined to 51.2 from 52.5, marking the third consecutive month of slowing growth, highlighting challenges in Europe’s largest economy.
  • Bond Market Yield Curve Returns to Normal: The US Treasury yield curve briefly returned to normal on Wednesday, with the 10-year yield rising above the 2-year yield for the first time since June 2022. This shift followed weaker-than-expected job openings data and dovish comments from Federal Reserve officials, signalling potential rate cuts. The normalisation of the yield curve, typically a recession indicator when inverted, eased some recession fears and provided a sense of optimism in the bond market.

FX Today:

  • EUR/USD Gains Amid Weaker US Data: The EUR/USD pair faced renewed buying pressure, rising close to 1.1100 as the US dollar weakened on disappointing US labour market data. The pair is positioned to challenge its 2024 high of 1.1201 (set on August 26), with further resistance at the 2023 top of 1.1275 (July 18) and the psychological level of 1.1300. On the downside, initial support is seen at the 55-day SMA at 1.0910, followed by the weekly low of 1.0881 and the crucial 200-day SMA at 1.0854.
  • GBP/USD Rebounds on Soft USD and Improved Risk Sentiment: GBP/USD traded higher around 1.3150 as the US dollar struggled to find demand following soft economic data. The pair is testing support near 1.3145, where the Fibonacci 23.6% retracement level aligns with the 20-period SMA on the 4-hour chart. If the pair breaks above 1.3170 (50-period SMA), further resistance could be tested at 1.3200 and the year-to-date peak of 1.3266. Support levels are at 1.3100 (psychological level), 1.3060 (100-period SMA), and 1.3040.
  • USD/CHF Extends Decline Amid Weak US Job Data: The USD/CHF pair declined by 0.45% to close at 0.8466 after weaker-than-expected US job openings data. The pair is currently hovering between its 200-hour moving average and 100-hour moving average at 0.8496, reflecting uncertainty in the market. Key support levels are at 0.8464, 0.8447, and 0.8423, while resistance is seen at 0.8505, 0.8529, and 0.8546. The pair’s movement suggests continued pressure on the USD, with traders closely watching for further economic indicators.
  • AUD/USD Sees Mild Gains on Reduced USD Strength: The AUD/USD pair experienced mild gains, rising to 0.6720 amid reduced USD strength. Despite the Australian Q2 GDP data meeting expectations, the pair’s upward momentum remains limited, with the RSI indicating potential exhaustion. Key resistance levels are at 0.6760, 0.6800, and 0.6820, while support levels to watch include 0.6700, 0.6680, and 0.6660. The market remains cautious, with sentiment driven by the broader risk appetite and economic data releases.
  • Gold Edges Higher on Soft US Data and Falling Yields: Gold prices ticked up to $2,493 per ounce, rising by 0.05% as weaker US labour market data fuelled speculation of a potential 50 basis point rate cut by the Federal Reserve in September. The decline in US Treasury yields and a softer US dollar provided additional support for gold, which continues to be seen as a safe-haven asset amid market volatility. Key resistance levels are at the psychological barrier of $2,500, followed by the all-time high at $2,531 and the next target at $2,550. Support is seen at the August 22 low of $2,470, and further below at the meeting point of the April 12 high and the 50-day SMA around $2,431.

Market Movers:

  • Dollar Tree Plummets on Downgraded Outlook: Dollar Tree shares tumbled more than 22% after the discount retailer slashed its full-year outlook for net sales and adjusted earnings per share. The company cited increasing financial pressures on middle- and higher-income customers, leading to concerns over its ability to maintain growth in a challenging economic environment.
  • GitLab Surges on Strong Earnings Forecast: GitLab’s stock soared over 21% following a robust third-quarter earnings outlook. The software developer projected earnings per share between 15 cents and 16 cents, significantly above the 11 cents estimated by analysts surveyed by LSEG. GitLab’s upbeat full-year sales forecast also exceeded expectations, driving the stock higher.
  • Zscaler Drops Sharply on Weak Earnings Guidance: Zscaler’s shares plunged more than 18% after the cloud security company issued a weaker-than-expected fiscal first-quarter earnings outlook. The company forecasted earnings between 62 cents and 63 cents per share, falling short of the 73 cents per share expected by analysts. Full-year earnings expectations were also revised down to a range of $2.81 to $2.87 per share, below the consensus estimate of $3.33.
  • AST SpaceMobile Jumps on Satellite Launch Plans: Shares of AST SpaceMobile spiked about 12.5% after the company announced plans to launch its first five commercial satellites, known as BlueBird, on or after September 12 from Cape Canaveral, Florida. The satellites are set to provide cellular broadband service globally, generating significant investor interest in the company’s ambitious expansion plans.
  • Asana Declines on Weaker Revenue Forecasts: Asana’s stock fell more than 5% following a disappointing third-quarter and full-year revenue outlook. The company expects third-quarter sales between $180 million and $181 million, slightly below the $182 million anticipated by analysts according to LSEG. Full-year revenue projections were also revised down to a range of $719 million to $721 million, missing the consensus estimate of $723 million.
  • Hormel Foods Declines on Lowered Forecasts: Shares of Hormel Foods dropped over 6% after the packaged food company reported weaker-than-expected fiscal third-quarter revenue and lowered its full-year forecast. Hormel posted $2.9 billion in revenue for the quarter, below the $2.95 billion expected by analysts, leading to a negative market reaction.

As September begins with mixed market performances, investors face a landscape filled with both caution and opportunity. The back-to-back losses in the S&P 500 and Nasdaq, coupled with the sell-off in semiconductor stocks, have underscored concerns over economic growth and potential recession signals. Meanwhile, modest gains in the Dow Jones and recoveries in tech stocks like AMD indicate a resilient investor sentiment. Across global markets, European and Asia-Pacific indices have shown significant declines, reflecting the broader impact of economic uncertainties and geopolitical tensions. With crucial economic data releases on the horizon, particularly the upcoming employment report, market participants remain vigilant as always.