On Wednesday, September 4th, the US stock market was down. There was a significant sell-off due to concerns about economic growth and AI trading.

The S&P 500 index fell 0.17% to close at 5520.07 points; the Nasdaq Composite index fell 0.3% to close at 17084.30 points; the Dow Jones Industrial Average rose 38.04 points to close at 40974.97 points, with a gain of 0.09%.

(Source: FX168)

(Source: FX168)

Employment Data

During the volatile trading session on Wednesday, the stock market seemed to turn positive as new data showed further signs of cooling in the labor market, prompting a decline in bond yields and strengthening investors' hopes for a larger scale interest rate cut in 2024.

Data shows that job openings in July fell to a record low since January 2021, reaching 7.67 million.

Investors and the Federal Reserve closely monitor the labor market as a gauge of economic strength. The job openings report has had an impact on Wall Street as traders anticipate the Fed to begin lowering benchmark interest rates at its September meeting.

After the data was released, the Federal Reserve's gauge on the Chicago Mercantile Exchange showed that the market anticipates a close to 50% chance of a 50 basis point interest rate cut by the Fed before the end of the September meeting, higher than the previous day's 38% probability.

High Frequency Economics economists Carl Weinberg and Rubeela Farooqi stated in a report, "Job vacancies are decreasing, recruitment is increasing, and the number of resignations remains stable. There is currently no indication that the labor market is on the verge of collapsing or that an economic recession is imminent."

The Beige Book of the Federal Reserve.

The overall assessment of the Federal Reserve's Beige Book is not optimistic. Economic activity in most regions has remained stable or declined, increasing from 5 in July to 9, with only slight growth in economic activity in 3 regions, while consumer spending has slowed in most regions.

Chris Larkin of Morgan Stanley E*Trade said, "The market may not be as nervous as it was a month ago, but they are still looking for confirmation that the economy is not cooling excessively. So far this week, they haven't received that confirmation."

Last month's jobs report raised concerns about economic growth, which investors are very worried about. Jerome Powell explicitly stated that the Fed is now more concerned about risks in the labor market than inflation, and a bad report would strengthen the case for a significant interest rate cut.

Market Focus

Several other reports this week will help the Federal Reserve and Wall Street gain a clearer understanding of the economic situation.

The Institute for Supply Management will release the August service index on Thursday. The service industry is the largest component of the US economy.

The US will release the August monthly employment report on Friday. Economists surveyed by FactSet expect the report to show an addition of 0.16 million new jobs in the US, higher than the 0.114 million in July, with the unemployment rate dropping from 4.3% to 4.2%. The strength of this report may affect the Federal Reserve's plan to cut benchmark interest rates.

The Federal Reserve will begin cutting interest rates in a few weeks, the main question now is by how much. The US monthly employment data to be released on Friday may reveal the answer.

Scott Rubner of Goldman Sachs Group stated that if the non-farm payroll data on Friday is weak, the stock market may enter a correction phase.

Tech stocks plummet.

Technology stocks have the largest weight in the market. Some of the larger companies in this industry have a huge impact on the overall market due to their massive market cap.

NVIDIA, with a market cap of $2.65 trillion, fell by 1.66% in volatile trading. Apple dropped by 0.88%, Intel fell by 3.33%.

As NVIDIA's stock price plummeted in the past two days, the stock market also experienced a decline, indicating a waning confidence in the artificial intelligence boom. The AI boom has been a major driver of the company's stock price increase this year.

This artificial intelligence giant's market cap evaporated $279 billion on Tuesday. According to reports, US regulators have intensified anti-monopoly investigations, which has caused Nvidia's stock price to continue to decline on Wednesday.

Bond market

A few days before the release of the non-farm payroll report, the job vacancy data fell below expectations, reaching the lowest level since 2021. This data immediately triggered a response in the bond market, pushing the yield on US two-year treasury notes briefly below the yield on ten-year treasury notes for the second time since 2022, as traders increased their bets on a large-scale interest rate cut this month.

The yield on 10-year US Treasury bonds fell from 3.83% late last Friday to 3.76%. This figure is lower than the 4.70% at the end of April, which is a significant change for the bond market.

The yield on 2-year US Treasury bonds, which is more closely related to potential actions by the Federal Reserve, fell from 3.87% to 3.77%.

The inversion level between 10-year and 2-year US Treasury bond yields has reached its lowest level in over two years. Historically, an inversion indicates an economic recession, although the current inversion has lasted for over two years despite economic growth.

Focus stocks

Medical care stocks also dragged down the market. Eli Lilly and Co. fell by about 1%, while Elevance Health fell by 2.66%.

Centene Corp. fell 8.69%, disappointing investors with the forecast results of the medical assistance plan members released by the company.

United States Steel Corporation's stock price fell 17.47%. Vice President Kamala Harris had previously stated at a campaign event in Pennsylvania that the company should maintain domestic ownership, which is consistent with the White House's opposition to the company's plan to sell to Japan's Nippon Steel.

Dollar Tree's stock price fell 22.16%, making it the stock with the largest decline among the S&P 500 index components, due to the significant downward revision of its annual profit forecast by the discount retailer.

Hormel Foods, the producer of Spam, saw its stock price fall 6.43% due to a downward revision of its annual revenue forecast.

Department store operator Nordstrom's stock price fell 0.18%. Members of the Nordstrom family proposed taking the company private for $3.76 billion in cash, after expressing interest in acquiring it several months ago.

Dick's Sporting Goods Inc. fell 4.87% as its full-year performance forecast failed to meet higher expectations, similar to the experience of Foot Locker Inc. last week.