Stocks fell sharply Tuesday as technology companies stumbled and weak manufacturing data reignited fears that the economy is cooling.
It was the worst day for marketssince Aug. 5, when concerns about a slowing economy prompted some of the most intense volatility Wall Street has seen in years. The tech-heavy Nasdaq composite index sank 570 points, or 3.3 percent, down about 8 percent from its early July record high. The Dow Jones Industrial Average fell more than 600 points, a 1.5 percent drop for the day. The S&P 500 also lost 119 points, a 2.1 percent slide.
Data released Tuesday showed signs that the U.S. manufacturing industry could be weakening. Although the ISM Manufacturing Purchasing Managers’ Index in August increased from July, it came in below many analysts’ expectations. The index is a closely watched measure of economic strength, and last month’s 47.2 reading indicated that the manufacturing sector is still contracting.
The latest data, paired with a recent increase in unemployment, means Wall Street may have renewed fears of a recession ahead of August’s jobs report, which is due out Friday. Markets view that reportas an important factorfor the Federal Reserve ahead of its next meeting in two weeks, when it is expected to cut interest rates.
“Manufacturing was stuck in low gear in August, held back by high interest rates, election uncertainty, the strong U.S. dollar and weak foreign markets,” said Bill Adams, the chief economist for Comerica Bank. “Manufacturing and construction spending should improve as the Fed starts reducing interest rates and the election passes.”
“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,” said Jeffrey Roach, chief economist for LPL Financial.
Technology stocks also struggled Tuesday. AI darling Nvidia fell nearly 10 percent, making it one of the worst performers in both the S&P 500 and the Nasdaq. The chipmaker’s stock is still suffering after its executives issued underwhelming profit guidanceduring its second-quarter earnings call last week. Several of Nvidia’s competitors — including Intel, Advanced Micro Devices and On Semiconductor — also saw declines on Tuesday. The VanEck Semiconductor ETF, which tracks the performance of semiconductor production and equipment companies, fell more than 7 percent.
Headwinds in sectors that are most sensitive to high interest rates, such as technology, have helped drag down private job growth in the last year, Adams said.