US indexes fell steeply Tuesday as weak manufacturing data prompted fresh fears about the economy.
The ISM Manufacturing index failed to meet expectations, and investors are now awaiting August jobs data.
The tech-heavy Nasdaq fell over 3%, weighed down by a big drop in Nvidia shares.
Stocks plunged Tuesday as manufacturing data chipped at confidence in the US economy.
The S&P 500 and Dow Jones Industrial Average shed 2% and 1.5%, respectively. The tech-heavy Nasdaq tumbled over 3%, as a sharp drop in Nvidia compounded the index's decline.
Tuesday's fallout marks the worst day for stocks since the market meltdown in early August and offered a grim introduction to September, which is historically a bad month for the stock market.
A weak manufacturing print intensified pressure on Tuesday's sell-off, as the ISM Manufacturing Purchasing Managers Index failed to meet expectations. The index rose 47.2% in August, under 47.9% consensus forecasts.
"Manufacturing employment shrank for the third consecutive month as manufacturing activity slowed in recent months. Although the manufacturing sector holds a smaller portion of the macro economy now than in previous cycles, investors should still position themselves for a broader slowdown throughout the balance of this year," LPL Financial chief economist Jeffrey Roach said.
As wavering manufacturing activity amplifies fears that the US may be facing a cooldown, investors have more reason to hope for a strong payrolls report on Friday.
All eyes are on this jobs print, and any surprise in the labor data could make or break the soft landing narrative.
Currently, economists anticipated that the US added 162,000 jobs last month, which suggests that the unemployment rate will edge down modestly from 4.3% to 4.2%.
If forecasts are correct, the Federal Reserve should be able to cut interest rates by a gradual quarter point in its upcoming September meeting. But a weaker-than-expected payrolls print would prompt the bank to slash rates by more than the market is currently pricing in.
Non-equity assets also suffered on Tuesday. While oil prices tumbled, the 10-year Treasury yield shed six points to 3.846%. Investors may need to brace for more volatility ahead, as September is famously a challenging month for stocks.
Here's where US indexes stood shortly after the 4:00 p.m. closing bell on Tuesday:
S&P 500: 5,528.93, down 2.12%
Dow Jones Industrial Average: 40,936.93, down 1.51% (-626.15 points)
Nasdaq composite: 17,136.30, down 3.26%
Here's what else is going on:
Nvidia is flashing a sell signal, veteran strategist Bill Blain warns.
Stocks are set to drop as much as 10% in the next 8 weeks, Fundstrat's Tom Lee warns.
3 reasons to buy up gold ahead of a 2025 rally, Goldman Sachs says.
Investors might be overestimating how far stocks will reach when the Fed cuts rates, JPMorgan says.
Last month's stock market turmoil could repeat once rates rise in Japan, Societe Generale says.
In commodities, bonds, and crypto:
West Texas Intermediate crude oil shed 4.38% to $70.33 a barrel. Brent crude, the international benchmark, plummeted 4.86% to $73.75 a barrel.
Gold stayed essentially flat at $2,523.1 an ounce.
The 10-year Treasury yield dropped six points to 3.846%.
Bitcoin shed 0.66% to $58,077.
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