The stock market experienced a downward trend on Wednesday morning, with index futures signaling a continuation of the September slump. Investors are eagerly awaiting the release of labor market data later this week, as it will likely influence the Federal Reserve’s decision on interest rate adjustments. Jeremy Siegel, a Wharton professor and chief economist at WisdomTree, believes the report will determine whether the Fed will implement a 25 basis point cut or a more substantial reduction.
Tech stocks were particularly affected by the market’s downturn, with Nvidia Corporation (NVDA) seeing its shares drop by more than 1% in pre-market trading. This decline contributed to an increase in the CBOE Volatility Index (VIX) by nearly 10%, reaching 22.76.
In addition to the labor market data, traders are also keeping an eye on other economic reports, including the Labor Department’s job opening data, the Beige Book, and various earnings reports. If these reports offer signs of a healthy economy and mitigate recession fears, traders might take advantage of Tuesday’s pullback by engaging in bargain hunting.
The SPDR S&P 500 ETF Trust (SPY) fell 0.36% to $550.90 in pre-market trading, while the Invesco QQQ ETF (QQQ) slid 0.60% to $459.05, according to data from Benzinga Pro.
Tuesday’s market downturn was attributed to a combination of weak economic data and a tech selloff that expanded into a broader market decline. The Institute for Supply Management’s manufacturing purchasing managers’ index (PMI) and S&P Global’s final manufacturing PMI both came in below expectations. The Commerce Department also reported a larger-than-expected decline in construction spending for July.
These negative economic indicators reignited concerns about a potential recession, prompting investors to adopt a more defensive stance. All three major indices—the Nasdaq Composite, S&P 500, and Dow Industrials—experienced their largest single-day decline since the global sell-off on August 5th.
Analysts at Morgan Stanley’s U.S. equity strategy team recommend focusing on businesses that prioritize operational efficiency, have sustainable pricing power, or both. The team, led by Mike Wilson, the firm’s chief equity strategist, observed that cyclical and defensive stocks have failed to recover significantly, while lower-beta stocks have demonstrated resilience amidst the mixed economic data. Wilson anticipates non-farm payroll gains of 185,000 for August and a decrease in the jobless rate to 4.2%.
Carson Group’s chief investment strategist, Ryan Detrick, noted a historical trend that suggests the second half of September tends to see outperformance in the market. He cautioned that while September is typically a challenging month for stocks, the real difficulties often arise in the latter half of the month.
Tom Lee, fund strategist, advises investors to exercise caution in the next eight weeks, from September until the election day. While he sees the current market weakness as an opportunity to buy, he encourages investors to be prepared to capitalize on any dips in the market.
Several economic reports are scheduled for release throughout the day, including the trade balance report for July, the July Job Openings and Labor Turnover Survey (JOLTS), factory goods orders for July, and the Beige Book.
In the technology sector, GitLab Inc. (GTLB) saw its shares surge nearly 17% in pre-market trading following the release of its quarterly results. However, PagerDuty, Inc. (PD) and Zscaler, Inc. (ZS) experienced declines of over 14% each.
Other companies scheduled to release their quarterly results include Ciena Corporation (CIEN), DICK’S Sporting Goods, Inc. (DKS), Dollar Tree, Inc. (DLTR), Hormel Foods Corporation (HRL), AeroVironment, Inc. (AVAV), C3.ai, Inc. (AI), Casey’s General Stores, Inc. (CASY), ChargePoint Holdings, Inc. (CHPT), and Hewlett Packard Enterprise Company (HPE).
Crude oil futures continued their decline, dipping below the $70-a-barrel psychological support level. Gold futures also experienced a downturn. Bitcoin (BTC/USD) fell to the $56.5K level. The yield on the 10-year Treasury note edged down 2.6 points to 3.818%.
Asian markets, particularly Japan’s Nikkei 225 average, experienced significant declines on Wednesday, attributed to the yen’s strength. South Korea and Taiwan’s markets, heavily reliant on tech stocks, also pulled back sharply in response to the sell-off seen in Wall Street overnight. However, New Zealand and Indonesia’s markets bucked the trend. European stocks were also trading lower in early trading.
