US stocks faced a significant sell-off on Thursday, driven by weak economic data and a sharp decline in chip stocks. The tech-heavy Nasdaq Composite led the losses, falling 2.3% after initially opening in positive territory. The Philly Semiconductor Index dropped more than 7%, with Arm Holdings leading the decline after disappointing results. This dragged down other market leaders such as Nvidia and AMD, which fell more than 6% and 8%, respectively. The benchmark S&P 500 fell 1.4%, while the Dow Jones Industrial Average lost 494 points, or 1.2%.
The 10-year Treasury yield moved below the 4% level for the first time since February, hovering near 3.98% after several weak economic data points were released on Thursday morning. The interest rate-sensitive Russell 2000 index, which had been rallying in anticipation of a Fed rate cut in September, fell more than 3% on Thursday.
The latest ISM data showed that the US manufacturing sector sank further into contraction territory in July. Other releases indicated that jobless claims rose to an 11-month high last week, and construction spending unexpectedly declined in June. Piper Sandler’s chief investment strategist, Michael Kantrowitz, noted that markets were interpreting the recent economic data as „bad news,“ despite the potential for steeper Fed rate cuts in 2024.
With a September rate cut from the Fed all but certain after Wednesday’s policy announcement, investors on Thursday began pricing in even more aggressive moves from the central bank this year. Data from the CME Group showed traders pricing in a roughly 25% chance of a 50 basis point rate cut in September, up from just an 11% chance one day ago.
The next key data release will come on Friday with the release of the July jobs report, expected to show the US economy added 175,000 jobs last month with the unemployment rate holding at 4.1%. Some individual stocks found relief on Thursday after positive quarterly earnings reports, notably Meta, which rose 4.4% after reporting better-than-expected results on Wednesday afternoon.
After the bell, big tech provided a mixed bag of corporate results. Apple shares were modestly higher after reporting better-than-expected third-quarter results, while Amazon stock fell more than 4% after the company’s current quarter revenue guidance fell short of Wall Street’s expectations.
Overall, the market’s reaction on Thursday reflected concerns about the economy’s health and the potential impact of further rate cuts from the Fed. Investors will continue to monitor economic data and corporate earnings reports for further insights into the market’s direction.