Market Review 3rd September 2024
Simplify the craziness
DAILY REVIEW
N
4 min read
As the first trading day of September unfolded, investors witnessed a broad sell-off across global markets. The Dow Jones Industrial Average plummeted over 600 points, marking a rough start to the month. Both the S&P 500 and the Nasdaq Composite also suffered significant declines, signaling a wave of uncertainty and caution among market participants.
3rd September 2024:
Dow Jones Industrial Average: Fell 626.15 points (1.51%) to close at 40,936.93.
S&P 500 Index: Dropped 2.12% to end at 5,528.93.
Nasdaq Composite: Tumbled 3.26% to settle at 17,136.30.
The significant declines across these major indices marked their worst single-day performances since the global sell-off on August 5. The S&P 500's information technology sector led the market lower, driven by sharp losses in semiconductor stocks.
Technology Sector Under Pressure
The technology sector, which has been a major driver of market gains throughout 2024, faced severe pressure on Tuesday.
Nvidia (NVDA): Dropped over 9%, dragging down the semiconductor space.
Micron Technology (MU), KLA (KLAC), and Advanced Micro Devices (AMD): Also experienced significant declines, contributing to a broader sell-off in the sector.
VanEck Semiconductor ETF (SMH): Fell more than 7%, reflecting widespread weakness among chip stocks.
Manufacturing Data Sparks Concerns
The market's decline was further fueled by disappointing economic data. Two key reports on manufacturing activity painted a bleak picture of the sector's health:
S&P Global's Manufacturing PMI: Showed a decline from July to August.
Institute for Supply Management (ISM) Manufacturing Index: Came in below expectations, raising concerns about slowing growth in the U.S. economy.
These reports reignited fears of a potential economic slowdown, adding to the bearish sentiment in the market.
Sector Performance: A Mixed Bag
Worst Performers: Technology and Energy
Technology: The tech sector's struggles were the most pronounced, with the S&P 500's information technology sector seeing its worst day since September 2022.
Energy: The energy sector also faced challenges, as oil prices declined sharply due to weaker demand from China and the potential for increased output from OPEC+.
Defensive Sectors See Gains
Consumer Staples and Utilities: In contrast, defensive sectors such as consumer staples and utilities posted gains, reflecting a "risk-off" tone among investors seeking safer assets.
Bonds: The bond market also saw gains, with 10-year Government of Canada bond yields falling back below 3.1%.
Post-Summer Market Performance Check
As summer comes to a close, it's essential to take a step back and assess the broader market performance year-to-date. Despite Tuesday's sell-off, the markets have experienced strong gains in 2024.
Year-to-Date Gains
TSX Composite Index: Up 11% through August.
S&P 500 Index: Returned 18% through August.
U.S. Large-Cap Stocks: Rose 9% since August 5, before Tuesday's decline.
Even with the recent volatility, the overall market trend remains positive, with technology and communication services stocks leading the way. The bull market has broadened, with sectors such as financial services, utilities, consumer staples, health care, and industrials all showing solid year-to-date gains.
Challenges Ahead: September and Beyond
September is historically one of the weaker months for stocks, and this year could be no different. Several factors, including election-related uncertainties and potential economic headwinds, could contribute to short-term market swings. However, the fundamental backdrop for the markets remains reasonably favorable as we head into the final months of 2024.
Economic Data to Watch This Week
The remainder of the week promises a slew of important economic data that could further shape the market's direction.
U.S. Labor Force Productivity (Thursday)
Importance: Labor force productivity has been a key driver of strong GDP growth in recent years. The upcoming report could provide valuable insights into the sustainability of this trend.
Potential Impact: A sustained productivity boom, driven by factors like AI and automation, could bolster the expansion and support market gains.
August Jobs Report (Friday)
Consensus Expectations:
U.S. Payrolls: Expected to increase by 160,000 (up from the previous month's 114,000).
Domestic Jobs: Expected to rise by 25,000 (after a decline in the prior month).
Unemployment Rate: Anticipated to see a slight downtick.
Market Implications: The jobs report will be closely watched, as it could influence the Federal Reserve's decision on whether to implement a rate cut in September. A weak report could heighten fears of an economic slowdown and increase expectations for a larger rate cut.
Tuesday's market decline was a stark reminder of the inherent volatility in the financial markets. While the drop was significant, it's essential to view it within the broader context of a strong year for equities.
Key Takeaways:
Technology and Energy Struggles: The tech sector, particularly semiconductor stocks, bore the brunt of the sell-off, while the energy sector also faced challenges.
Defensive Plays Gain: Investors flocked to safer assets, leading to gains in consumer staples, utilities, and bonds.
Economic Data in Focus: The market will closely monitor this week's economic data, with particular attention to the August jobs report, which could have significant implications for Federal Reserve policy.
As we move into the final months of 2024, investors should brace for potential volatility but remain focused on the longer-term trends that continue to support the market's upward trajectory.
References
S&P Global Manufacturing PMI: Link to full report
Institute for Supply Management (ISM) Manufacturing Index: Link to ISM report
Dow Jones Industrial Average Historical Data: Link to Dow Jones data
Nasdaq Composite Historical Data: Link to Nasdaq data
S&P 500 Historical Data: Link to S&P 500 data
Federal Reserve Rate Cut Expectations: Link to Fed news
U.S. Labor Force Productivity Report: Link to Labor Productivity report
August Jobs Report Preview: Link to jobs report preview
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