FX.co ★ Nvidia Loses $279 Billion, Tesla Disappoints Investors, Boeing Suffers From Analysts

US Stocks Under Attack Again: September Lives Up to Its Reputation

US stocks plunged on Tuesday, kicking off one of the worst months in stock trading history as investors anxiously await more economic data that could impact the Federal Reserve's interest rate cut decisions.

Massive Index Drop

Major stock indexes such as the S&P 500, Nasdaq Composite and Dow Jones Industrial Average posted their biggest daily losses since early August. Of the 11 sectors in the S&P 500, nine were in the red, with technology, energy, communications services and raw materials feeling the brunt.

Sluggish Manufacturing Growth Weighs on the Market

Market optimism was dampened by the release of data from the Institute for Supply Management, which confirmed that the US manufacturing sector continues to struggle. Despite a slight improvement in August compared to July, when production hit an eight-month low, the situation remains far from stable.

Historically Weak September: Seasonality in Action

September is traditionally a tough month for stock markets. According to data collected since the 1950s, this month often brings significant losses. Jason Brown, president of Montgomery, Texas-based Alexis Investment Partners, emphasized that seasonality plays a key role in the current market swings.

"Today's weak ISM report reinforces that point, but seasonality remains a key factor, especially given the strong performance of the market in recent months," Brown said.

Self-Fulfilling Prophecy

"Many market participants believe that September is a particularly tough time for stocks, and this belief often fuels negative sentiment," he added. Such pessimism can intensify with each new report, leading to the market's fears becoming reality.

With uncertainty growing, market participants will be closely monitoring future economic data and the actions of the Federal Reserve to predict what measures will be taken to stabilize the situation.

Shares of the largest tech companies, part of the so-called "Magnificent Seven," have experienced a sharp decline. These companies, which had led the market growth throughout the year, are now under intense pressure. Nvidia suffered particularly heavy losses, with its shares falling almost 10%, wiping out a record $279 billion in market capitalization. This left the company's market value at $2.65 trillion, the biggest one-day drop for a US company.

Hits on the giants: everyone in the red

In addition to Nvidia, other tech giants also saw losses. Alphabet fell 3.6%, Apple fell 2.7%, and Microsoft lost 1.8%. This reflected a general downward trend, particularly felt in the semiconductor sector. The Philadelphia SE Semiconductor Index fell 7.8%, highlighting the serious problems in this segment.

Global indices under pressure

The overall picture on the stock market was depressing. The Dow Jones Industrial Average lost 626.15 points, or 1.51%, to end the day at 40,936.93. The S&P 500 also fell 119.47 points, or 2.12%, to end the day at 5,528.93. The Nasdaq Composite suffered the biggest losses, falling 577.33 points, or 3.26%, to 17,136.30.

VIX Volatility Index Signals Alarm

The CBOE Volatility Index, known as Wall Street's fear gauge, jumped 33.2% to 20.72. That was the biggest single-day percentage gain since early August, suggesting investors are growing wary about the market's outlook. High volatility indicates nervousness of market participants and instability of the current market situation.

Expectations ahead of key economic data

Investors are eagerly awaiting the release of a number of labor market reports due this week. However, the main event will be the data on non-farm payrolls, which will be released on Friday. These figures traditionally have a significant impact on market sentiment and can become a key indicator for further decisions of the Federal Reserve.

Fed Meeting and Prospects for Policy Easing

The upcoming Federal Reserve meeting on September 17-18 promises to be an important milestone for understanding the future direction of monetary policy. Particular attention will be focused on the statements of Fed Chairman Jerome Powell, who has previously supported the idea of easing measures. The regulator's decisions can have a significant impact on the future dynamics of stock markets and the macroeconomic situation as a whole.

Markets at a Crossroads

The current volatility in the markets, exacerbated by the sharp decline in tech giants and expectations of important economic data, creates an atmosphere of uncertainty. Investors will continue to watch developments with caution in order to adjust their strategies depending on the signals coming from the labor market and the Fed.

The likelihood of a rate cut: expectations and forecasts

According to the FedWatch tool from CME Group, the market is anticipating a possible interest rate cut at the upcoming Federal Reserve meeting. The chance of a 25 basis point rate cut is estimated at 63%, while the chances of a larger 50 basis point cut are 37%. These expectations have a strong impact on investor sentiment, as any move by the Fed could dramatically change the stock market dynamics.

Tesla: Ambitious Plans, But Stocks Under Pressure

Tesla shares fell 1.6% after the company announced plans to build a six-seat version of the Model Y in China, but the project is not expected to be completed until the end of 2025. The news failed to support the company's share price, as investors apparently expected more immediate and tangible results from the electric car maker.

Boeing Loses Ground After Rating Downgrade

Boeing saw a massive 7.3% drop after Wells Fargo revised its rating on the company's shares to "underweight" from "equal perform." The change triggered a wave of selling, adding further pressure to the shares of the aircraft giant. The downgrade fuels investor concerns about the company's future amid an uncertain macroeconomic environment.

Stock Ratios: Declining Stocks Dominate

US markets are showing a bias towards declining stocks over advancing ones. On the New York Stock Exchange (NYSE), the ratio of declining stocks to advancing ones was 2.52 to 1. Meanwhile, on the Nasdaq, the ratio was even more pronounced at 3.5 to 1, with 3,315 stocks falling and only 946 advancing. This negative trend underscores the overall weakness of the market, despite some positive news.

Trading Volumes Are Strong

Trading volume on US exchanges was 12.14 billion shares, above the average of about 11 billion over the past 20 days. This indicates increased investor activity in an environment of high volatility and uncertainty in the market.

Semiconductors and AI: Nvidia Continues to Fall

Semiconductor stocks remain at the center of the decline. Leading AI player Nvidia has lost nearly 10%, a significant blow to the sector. Wall Street's PHLX semiconductor index has fallen 8%, highlighting the extent of the challenges facing this important market segment.

September Is a Month of Big Risks

Investors continue to express concerns about the traditionally tough month of September for stock markets. Historically, this month brings many problems and losses, which, combined with the current uncertainties, creates additional risks for traders.

Tech Under Pressure: Nvidia Falls Short of Expectations

Michael Harone, chief SPDR strategist at State Street Global Advisors, comments on the market situation with Nvidia shares, which, despite its strong position in the AI space, has fallen short of investors' high expectations. "It's no longer enough to just post good results," says Arone. "Investors expect perfect results, especially from a company whose stock has risen so much." Nvidia's slight misses in earnings have led investors to sell the stock en masse.

The S&P 500 Rise and Weakening Tech

With the S&P 500 up 20% overall by the end of August, many investors are starting to take profits, especially in the tech sector. Arone points out that tech stocks are at high valuations while their growth is slowing. This creates an opportunity to exit positions, especially as skepticism sets in about whether the big AI spend is worth it or whether it can drive rapid revenue growth.

Fall Slowdown and Seasonal Weakness

"It's a predictable pattern: after a quiet summer of low volumes, the fall months traditionally see a pick-up in activity, coinciding with the onset of a weak season in the market," explains Arone. He notes that September has been a losing month for equities in the last four years and six out of the last 10. Historical data plays a major role in how investors view this period, adding to the caution in the market.

Rotation Out of Tech and Into Other Sectors

Arone predicts that we'll see a continued rotation of capital out of tech and into other sectors amid seasonal weakness and valuation adjustments. "We're moving toward broader market leadership," he says. "Lower interest rates and lower inflation are creating the conditions for the earnings growth gap between tech and other industries to narrow."

A New Wave of Market Leaders

The demise of tech, which has dominated the year, will open up opportunities for other sectors to shine. This shift in investor focus amid slowing revenue growth in the tech sector could usher in a new phase in the market, with companies from more traditional industries poised to offer stability and growth as inflation pressures ease and rates fall.