Stocks kicked off September on a low note Tuesday, as growth stocks slumped across the broader market on renewed fears the U.S. economy could be headed towards a slowdown. The Dow Jones Industrial Average lost over 600 points in afternoon trading, while the S&P 500 Index and Nasdaq Composite were about 2.1% and 3.3% lower, respectively.
Here's how the market settled on Tuesday:
S&P 500 Index
Dow Jones Industrial Average
Nasdaq Composite Index
Zoom In:
Wall Street's downward shift on Tuesday was sparked by U.S. manufacturing activity growing at a slower-than-expected pace in August, fueling uncertainty over the health of the economy.
The Institute for Supply Management's monthly survey of purchasing managers showed only 47.2% reporting expansion last month, coming in below estimates and the 50% level, indicating contraction overall. August's report, however, was slightly above July's reading of 46.8%.
"Demand continues to be weak, output declined, and inputs stayed accommodative," said Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, in a statement. "Demand remains subdued as companies show an unwillingness to invest in capital and inventory due to current federal monetary policy and election uncertainty."
The S&P Global U.S. Manufacturing purchasing managers index also showed production decline for the first time in seven months in August on Tuesday, with the headline reading showing a decrease to 47.9 in August from 49.6 in July.
"A further downward lurch in the PMI points to the manufacturing sector acting as an increased drag on the economy midway through the third quarter. Forward-looking indicators suggest this drag could intensify in the coming months," said Chris Williamson, chief business economist at S&P Global Market Intelligence, in a statement.
Zoom Out:
September is typically a low month for Wall Street, with the S&P 500 losing an average of 2.3% during the month over the past decade, according to data from FactSet, making it the worst month overall for the broader market. This time around, market sentiment is weighed down mounting geopolitical tensions, uncertainty surrounding tight race of the U.S. presidential election, and worries that the Federal Reserve will not cut interest rates fast enough to sustain gain, mixed with an undercurrent of anxiety that the economy could still be headed towards a recession.
Morgan Stanley strategist Michael Wilson believes the S&P 500 is currently priced perfectly, with the firm not expecting much growth for the broader market index in the months ahead.
"Unless the Fed cuts more than the market is already expecting, the economy strengthens, and/or additional form of poilucy stimulus are introduced, equity investors should expect minimal returns at the index level over the next 6-12 months and should remain up the quality curve," Wilson wrote in a note.
In Single-Stock News:
Berkshire Hathaway
Boeing
"We think BA had a generational [free cash flow] opportunity this decade, driven by ramping production on mature aircraft and low investment need," Matthew Akers wrote in a note. "But after extensive delays and added cost, we now see growing production cash flow running into a new aircraft investment cycle, capping FCF a few years out."
For Wednesday:
Market participants will turn their attention towards economic reports including July's job openings and the Fed's Beige Book. Wednesday's earnings reports also include Zscaler
