US stocks faced a tumultuous day on Thursday as weak economic data and a sharp sell-off in chip stocks led to losses across all three major indexes. The tech-heavy Nasdaq Composite led the declines, falling 2.3% after initially opening in positive territory. The Philly Semiconductor Index plummeted over 7%, with Arm Holdings leading the decline after disappointing results. This dragged down other market leaders like Nvidia and AMD, which fell more than 6% and 8%, respectively. The benchmark S&P 500 and the Dow Jones Industrial Average also experienced losses, with the Dow shedding 494 points, or 1.2%.
The 10-year Treasury yield dropped below the 4% level for the first time since February, hovering near 3.98% following the release of several weak economic data points on Thursday morning. The interest rate-sensitive Russell 2000 index, which had been rallying in anticipation of a Fed rate cut in September, fell over 3% on Thursday.
The latest ISM data revealed that the US manufacturing sector sank deeper into contraction territory in July. Additionally, 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 interpreted the recent economic data as „bad news,“ despite the potential for steeper Fed rate cuts in 2024.
Investors reacted to the likelihood of a September rate cut from the Fed, with traders pricing in a 25% chance of a 50 basis point rate cut in September, up from just 11% the day before. The upcoming release of the July jobs report on Friday is expected to show the US economy added 175,000 jobs last month, with the unemployment rate holding at 4.1%.
Despite the overall market decline, some individual stocks found relief on Thursday after positive quarterly earnings reports. Meta shares rose 4.4% after reporting better-than-expected results, while Apple shares were modestly higher following the tech giant’s strong third-quarter earnings. However, Amazon stock fell over 4% after the company’s current quarter revenue guidance fell short of expectations.
In after-hours trading, Intel stock plummeted after reporting weak second-quarter results, offering a downbeat forecast, confirming expected job cuts, and suspending its dividend. The chip giant struggled to keep pace with key rivals amid an industrywide shift towards AI technologies.
Overall, Thursday’s market action reflected investors‘ concerns about the economy and the potential impact of further rate cuts from the Fed. The road to September is paved with uncertainty, as investors grapple with a mix of economic data and corporate earnings reports that could shape the market’s trajectory in the coming months.