On Tuesday, benchmark US equity indexes experienced significant declines following reports indicating that the manufacturing sector remained in contraction during August, a crucial month for economic data. The Nasdaq Composite Index plunged 3.3%, settling at 17,136.3, while the S&P 500 decreased by 2.1%, closing at 5,528.9.
The Dow Jones Industrial Average fell 1.5% to finish at 40,936.9, retreating from its record closing achieved just last Friday. Notably, the technology sector bore the brunt of these losses, witnessing a staggering 4.4% decline. Despite the downturn, sectors such as consumer staples and real estate reported gains, illustrating a divergence in market performance amid broader economic uncertainties. The previous day, US markets were closed in observance of Labor Day, leaving investors keenly awaiting guidance from economic indicators.
The Institute for Supply Management (ISM) and S&P Global reported data showing that the US manufacturing sector continued to wrestle with contraction as a weakening demand significantly impacted new orders. Jefferies, a global investment bank, noted, "(The Federal Reserve's) rate cuts will help, but it is looking more and more like it's going to take more than a handful of (25-basis-point) moves to get manufacturing going again;" an indication that more robust measures may be necessary to stimulate growth in this sector. There are also critical economic reports on the horizon, specifically the ISM and S&P Global's US services sector data for August, which is slated for release on Thursday.
Investors are undoubtedly hoping for more favorable data to boost market sentiment. In the fixed-income market, the US 10-year Treasury yield dropped 6.7 basis points to 3.84% on Tuesday, while the two-year yield decreased by 4.7 basis points, landing at 3.88%. These movements suggest a shift in investor sentiment towards safer assets amid the prevailing uncertainty. Company-specific news also contributed to market volatility.
Intel Corporation ($INTC) saw its shares plummet by 8.8%, making it the worst performer among Dow stocks and among the steepest decliners on the Nasdaq. Reports suggest that Intel might be removed from the Dow due to its sharp share price drop this year. Analysts are closely watching the situation as Intel's Chief Executive, Pat Gelsinger, is reportedly set to unveil a strategy later this month that may involve divesting certain businesses and recalibrating capital spending priorities. Moreover, shares of Nvidia Corporation ($NVDA), a heavyweight in the chip-making sector, fell by 9.5%, marking it as one of the poorest performers across both the S&P 500 and Nasdaq indexes. Boeing Company ($BA) was not spared from the downturn, experiencing the second-largest drop on the Dow with a decrease of 7.3%.
This decline followed Wells Fargo's decision to downgrade its rating on Boeing's stock from 'equal weight' to 'underweight' and revise its price target from $185 to $119, reflecting growing apprehensions regarding the aerospace giant's future profitability. On a positive note, Tilray Brands Inc. ($TLRY) successfully completed its acquisition of craft breweries Hop Valley Brewing, Terrapin Beer, and Revolver Brewing from Molson Coors Beverage Company ($TAP).
However, in a separate development, Molson Coors is reportedly halting several of its corporate diversity initiatives, aligning with a trend among major corporations that are retracting from diversity, equity, and inclusion efforts. Following this news, shares of Molson Coors climbed 5.4%, becoming the best performer on the S&P 500, whereas Tilray's shares dropped by 1.8%. Looking at the broader market picture, S&P 500 companies have recently reported a double-digit percentage increase in quarterly earnings compared to the previous year, indicating a 'better-than-expected' earnings season that is nearing its conclusion, as highlighted by Oppenheimer Asset Management in a client note.
This suggests robust corporate earnings may offer some support for the markets despite prevailing economic challenges. In commodities, West Texas Intermediate crude oil prices retreated by 4.4%, settling at $70.35 a barrel on Tuesday. Analysts from D.A. Davidson highlighted that concerns over sluggish economic growth in China are amplifying worries regarding global oil demand.
In precious metals, gold prices decreased by 0.2% to $2,523.40 per troy ounce, while silver saw a more notable decline of 2.6%, settling at $28.39 per ounce. The continued fluctuations in commodity prices are reflective of the broader economic environment and contribute to the challenges facing investors in today's market landscape..