Wall Street’s main indexes slumped on Thursday, weighed by megacap tech and chip stocks, while small-caps bore the brunt of selling pressure on renewed fears of a slowdown in the US economy.
The Dow plunged 566 points, or 1.4%, to 40,275. The S&P 500 lost 1.3%, and the Nasdaq slid 2%.
Fresh data showed a measure of manufacturing activity dropped to an eight-month low in July, keeping the sector in a contraction and dragging industrials stocks down 2%. Caterpillar and Boeing were the biggest weights on the blue-chip Dow.
“The overall market is being influenced by the weak ISM manufacturing report, which tells the market that the economy might actually be in a worse shape than they had expected,” said Robert Pavlik, senior portfolio manager at Dakota Wealth.
“And (Federal Reserve Chair) Powell’s still on hold with rate cuts, so that’s gotten them concerned.”
The small-cap Russell 2000 slumped over 3% to a more than one-week low after logging its biggest monthly gain so far in 2024.
Most megacap stocks fell, with Apple and Amazon down over 1% each ahead of their quarterly results after markets close, while Tesla slumped 4%.
Nvidia dropped 3.2% in a broader chip stocks rout sparked by Arm Holdings’ conservative revenue forecast and Qualcomm flagging a revenue hit from the impact of trade curbs, knocking their stocks down 15% and 8%, respectively.
However, Meta Platforms bucked the trend with a 6.4% jump after its second-quarter revenue beat and upbeat third-quarter sales forecast pointed to the possibility that its artificial intelligence costs would be covered.
The Facebook-owner’s quarterly results were the first among “Magnificent Seven” companies to enthuse investors, allaying concerns around AI spending after dismal earnings from Alphabet and Microsoft last month.
Markets have been looking for signs that tech behemoths can hold on to their bumper gains after steering Wall Street to record highs this year, on AI euphoria and hopes of early rate cuts.
After Fed chief Jerome Powell offered the stock market a likely pivot to policy easing in September, investors are now trying to gauge if the central bank will be able to ease policy at a pace consistent with achieving the much awaited “soft landing” for the economy.
Earlier in the day, data showed jobless claims rose to an 11-month high, another sign of labor market weakness ahead of Friday’s Non-farm Payrolls reading.
Moderna slumped 20% after cutting its 2024 sales forecast for COVID-19 and respiratory syncytial virus vaccines by up to 25%.
Eli Lilly rose 3% after trial results showed weight-loss drug Zepbound reduces the risk of hospitalization, death and other outcomes for obese adults with a common type of heart failure.