September trading began on a sour note as US stocks experienced significant declines, driven by renewed concerns about the health of the economy. Major indices like the Dow Jones Industrial Average and S&P 500 fell sharply, with the tech-heavy Nasdaq Composite suffering even steeper losses. Weak manufacturing data added to investor anxiety, particularly impacting technology and semiconductor stocks. Additionally, oil prices plummeted, erasing all gains for the year as concerns over excess supply and weakening demand weighed on the market. This downturn reflects heightened market volatility and cautious sentiment as investors reassess the potential for a recession and brace for a challenging month ahead.

Key Takeaways:

  • Dow and S&P 500 Kick Off September with Sharp Declines: The Dow Jones Industrial Average fell 626.15 points, or 1.51%, to close at 40,936.93. The S&P 500 also experienced a significant drop, losing 2.12% to end at 5,528.93. Both indices recorded their worst performances since the global sell-off on August 5, underscoring investor anxiety about the economic outlook.
  • Nasdaq Composite Suffers Major Losses: The Nasdaq Composite dropped 3.26% to close at 17,136.30, marking its steepest one-day decline since early August. Semiconductor stocks led the sell-off, with Nvidia falling over 9%, while the VanEck Semiconductor ETF (SMH) declined more than 7%. This sector’s weakness significantly dragged down the tech-heavy index amid renewed fears of economic slowdown and supply chain disruptions.
  • Weak Manufacturing Data Fuels Recession Concerns: New economic data indicated signs of weakening in the US economy, contributing to the market’s downturn. The Institute for Supply Management’s manufacturing index fell to 47.2%, below the 50% threshold that indicates expansion, while S&P Global’s manufacturing PMI declined to 47.9. These readings suggest a contraction in manufacturing activity, heightening fears of a potential recession.
  • European Markets Extend Losses Amid Wary Sentiment: European stocks continued to slide as investor sentiment turned cautious. The pan-European Stoxx 600 index fell 1%, with major indices such as the FTSE 100 and CAC 40 dropping 0.78% and 0.96%, respectively. Sectoral declines were led by mining stocks, which fell 3.28%, and tech stocks, which lost 2.23%. However, food and beverages saw slight gains, adding 0.09%. Key losers included ArcelorMittal (-5.16%) and STMicroelectronics (-4.60%). Nexans rose 4.5% following a major contract win.
  • Asia-Pacific Markets Mostly Decline: The Asia-Pacific region saw a mixed performance, with most markets closing lower. South Korea’s Kospi fell 0.61% to 2,664.63, and the Kosdaq dropped 1.15% to 760.37, following inflation data that hit a 42-month low. Japan’s Nikkei 225 closed marginally down at 38,686.3, while the broader Topix index gained 0.64% to 2,733.27. Australia’s S&P/ASX 200 declined 0.08% to 8,103.2, reflecting cautious sentiment across the region. Conversely, Mainland China’s CSI 300 index edged up 0.26% to 3,273.49, bouncing back from a seven-month low.
  • Treasury Yields Decline as Growth Fears Intensify: US Treasury yields fell as investors weighed the impact of slowing economic growth on future interest rates. The yield on the 10-year Treasury dropped close to 7 basis points to 3.844%, while the 2-year Treasury yield decreased by 5 basis points to 3.877%. These declines reflect increased investor caution in response to weak economic data and the potential for further economic slowdown.
  • Oil Prices Plunge as Supply Concerns and Weak Demand Weigh on Market: US crude oil futures fell sharply by more than 4%, with the West Texas Intermediate October contract closing at $70.31 per barrel, down $3.23. Brent crude also saw a significant drop, ending at $73.75 per barrel, down $3.77. These declines erased all gains for the year, driven by concerns over excess supply, falling demand, and bearish technical signals. The weak manufacturing data from China and the US, two of the largest oil consumers, further pressured oil prices.

FX Today:

  • Gold Declines as Soft US Data Boosts Dollar: Gold prices edged lower, closing at $2,491 per ounce, down 0.29%. The soft manufacturing figures from the US heightened concerns over economic growth, boosting demand for the dollar as a safe haven and putting pressure on gold. Despite the dip, gold remains above the key support level of $2,470, with further downside limited by the August 22 low. If gold breaks below this support, the next target would be the meeting point of the August 15 low and the 50-day Simple Moving Average (SMA), near the $2,427-$2,431 range. On the upside, resistance is seen at the $2,500 mark, and a move above this level could open the path to the all-time high and the $2,550 resistance.
  • EUR/USD Slightly Lower on Weak US Manufacturing Data: The EUR/USD pair edged lower to the 1.1040 region, as the US dollar strengthened following disappointing US manufacturing data. The pair found support near the 1.1030 level. Looking ahead, the key support level is at the 55-day Simple Moving Average (SMA) of 1.0903, while resistance is observed at 1.1114, with a potential rise towards 1.1201 if bullish momentum strengthens.
  • GBP/USD Nears Key Support as Dollar Strengthens: GBP/USD remained under pressure, approaching the critical 1.3100 level as the dollar gained strength amid weak US manufacturing data. The pair broke below the 1.3130 mark, highlighting a bearish trend and raising the risk of further declines. Immediate support is now at 1.3100, a psychological barrier, with the next target being the 100-period Simple Moving Average (SMA) at 1.3040. A break below these levels could lead to a test of the 1.3000 mark. On the upside, if GBP/USD can reclaim the 1.3130 level, it may attempt to recover towards resistance at 1.3170 and 1.3200.
  • AUD/USD Drops to Over One-Week Low Amid Risk-Off Sentiment: The Australian dollar weakened today, with AUD/USD dropping to 0.6710, its lowest level in over a week, as risk aversion gripped the market. The pair fell below key moving averages, including the 200-hour MA at 0.6772, indicating strong selling pressure. The decline was driven by concerns about global growth and commodity demand, particularly impacting currencies like the AUD that are sensitive to global economic conditions. Key support levels to watch are 0.6704 and 0.6690, while resistance could emerge around 0.6739 and 0.6774 if market sentiment improves.
  • USD/JPY Falls as Market Reassesses BoJ Outlook: USD/JPY fell over 0.80% to trade at 145.68, reflecting renewed speculation about potential shifts in the Bank of Japan’s (BoJ) monetary policy stance. Recent hawkish signals from BoJ officials have led to a reassessment by investors, pushing the yen higher against the dollar. The pair formed a ‘bearish engulfing’ chart pattern, indicating further downside risk. Support is initially at 145.33, with a break below this level potentially targeting 145.00 and 143.45. For a reversal, USD/JPY would need to move back above 148.45 and aim for the 150.00 level.

Market Movers:

  • Vaxcyte Surges on Positive Vaccine Trial Results: Vaxcyte shares skyrocketed over 36% after the company reported positive results from its Phase 1/2 study for its vaccine candidate. The stock reached a record high as analysts from Leerink Partners praised the results as “stunning,” highlighting the vaccine’s potential to be a “category killer” in preventing invasive pneumococcal disease in adults aged 50 and older.
  • Boeing Tumbles on Downgrade: Boeing’s stock plummeted more than 7% following a downgrade from Wells Fargo to underweight from equal weight. The bank cited concerns over Boeing’s free cash flow per share peaking by 2027. This marked Boeing’s largest one-day loss since October 26, 2022, reflecting investor fear about the aircraft maker’s long-term financial outlook.
  • Cleanspark Falls Sharply on Monthly Mining Update: Shares of Cleanspark, a crypto mining company, plunged more than 15% after its August mining update showed a decrease in mined bitcoins to 478, down from 494 in July and 659 in August last year. The decline in production heightened investor concerns about the company’s operational efficiency.
  • Semiconductor Stocks Decline on Weak Market Sentiment: Semiconductor stocks took a significant hit, with KLA and Nvidia both falling around 9.5%. Micron Technology and Advanced Micro Devices each dropped approximately 8%, while Taiwan Semiconductor Manufacturing and Broadcom were down more than 6%. 
  • Super Micro Computer Rebounds Slightly: Super Micro Computer shares rose around 1% after CEO Charles Liang issued a letter to customers and partners defending the company against allegations from a recent Hindenburg Research report. Liang called the report “misleading” and assured stakeholders that the delayed SEC filing would not materially impact the company’s financial results for Q4 or fiscal year 2024.
  • United States Steel Drops Amid Political Opposition: United States Steel shares fell around 6% after Vice President Kamala Harris voiced opposition to the planned sale of US Steel to Japan’s Nippon Steel at a Labor Day rally. Her remarks emphasised the importance of maintaining strong American steel companies, leading to concerns about potential regulatory hurdles and the future of the sale.

As September begins, the sharp declines in the Dow, S&P 500, and Nasdaq reflect a market fighting with renewed fears of an economic slowdown and weak manufacturing data. Investors are particularly wary of the tech sector, which has seen significant losses, especially in semiconductor stocks. The declines across European and Asia-Pacific markets underscore global concerns, with most indices in the red amid caution over economic indicators and inflation trends. While US Treasury yields fell as investors braced for slower growth, oil prices also tumbled, erasing gains for the year. As markets navigate this turbulent start, all eyes are on upcoming economic data, including the August jobs report, which could set the tone for the rest of the month.