US stocks took a nosedive on Tuesday, marking a grim start to September, a month historically known for its volatility. The Dow Jones Industrial Average (^DJI) plummeted by 0.6%, while the S&P 500 (^GSPC) and the tech-heavy Nasdaq Composite (^IXIC) both slid nearly 1%. This downturn follows a period of gains for major Wall Street indexes, leaving investors wondering what's next.
Why the Sudden Drop?
Several factors contributed to the market's negative performance. Rising Treasury yields played a significant role, with the 30-year yield (^TYX) approaching 5% for the first time since July. The benchmark 10-year yield (^TNX) also saw an increase, adding pressure to equities.
Adding to the anxiety, concerns surrounding President Trump's tariffs and uncertainty about the Federal Reserve's independence loomed large. These issues, coupled with the anticipation of crucial economic data releases this week, created a perfect storm for market jitters.
Big Tech Takes a Hit
Even the giants of the tech world weren't immune. Alphabet (GOOGL, GOOG) and Amazon (AMZN) led the declines among the "Magnificent Seven" Big Tech stocks, both experiencing losses of over 2%.
Gold Shines Amidst the Gloom
While stocks struggled, gold (GC=F) surged to over $3,500 an ounce, surpassing its April all-time high. This surge was fueled by expectations that the Fed will lower interest rates this month, a possibility hinted at by Chair Jerome Powell.
What to Watch This Week
All eyes are now on Friday's jobs report for August, a critical indicator that will shape expectations for potential interest-rate cuts. Readings on job openings and private payrolls will precede this crucial report, providing further insights into the health of the US economy. Investors are also closely monitoring updates on US manufacturing.
Markets are currently pricing in a roughly 90% chance of a 25 basis point rate cut in September. However, this week's data could significantly influence the Fed's decision, making it a crucial period for investors to stay informed and prepared.