The S&P 500 Drops the Most since the August Meltdown – US Market Wrap

Stocks had their worst day since the August 5th market meltdown, with the S&P 500 falling more than 2%, as growth and monetary concerns combined to torch risky assets, much like they did a month ago.

Just as in the August episode, technology was hit the hardest, with Nvidia driving a drop in chipmakers. And the parallels do not end there. The yen rose, a closely watched manufacturing gauge missed forecasts again, and oil fell on concerns about weak global demand. Wall Street’s “fear gauge,” the VIX, soared. Treasury yields fell, with traders betting on an unusually large half-point Fed rate cut this year.

With inflation expectations relatively stable, attention has shifted to the economy’s health, as signs of weakness could accelerate policy easing. Swap traders expect the Fed to cut rates by more than two full percentage points over the next 12 months, the steepest drop outside of a downturn since the 1980s.

The S&P 500 fell to around 5,530. The Nasdaq 100 declined 3.1%. The Dow Jones Industrial Average dropped 1.5 percent. The Russell 2000 index of small firms fell 3.1%. The $22 billion VanEck Semiconductor ETF experienced its largest drop since March 2020, with Nvidia down 9.5%. Boeing fell 7.3% following an analyst downgrade.

Treasury 10-year yields fell seven basis points, to 3.84%. A record number of blue-chip companies are flooding the corporate bond market. The yen rose as Bank of Japan Governor Kazuo Ueda reiterated that the central bank will continue to raise interest rates if the economy and prices perform as expected.