Tuesday, September 3, saw a dramatic stock market sell-off, confirming investor fears about the ‘September Effect,’ as the ninth month of the year has historically been the weakest for stocks.
Throughout the day’s trading, all three benchmark indices – the S&P 500, Dow Jones Industrial Average, and Nasdaq 100 – fell between 1.5% and 3.15%, reflecting a broad sell-off.
Along with overall concerns about trading in September, the downtrend was driven by a relatively weak manufacturing report, which saw a moderate sector contraction. Construction spending’s 0.3% decline was the most singled-out metric.
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Overall, the day proved the weakest for the U.S. stock market since the bloodbath of early August, and as much as $1.05 trillion was wiped out in the single-session crash.
Furthermore, traders have another headache ahead as the next employment report is due on Friday, September 6. It is worth remembering that the August sell-off was triggered, in large part, by the convergence of weak U.S. jobs data and the unwinding of the yen carry trade.
Stock, crypto, and commodity markets all experience the sell-off
The drop was not confined solely to the benchmark stock market indices as shares of most American companies – inducing the well-performing blue-chips such as Nvidia (NASDAQ: NVDA) and Apple (NASDAQ: AAPL) saw massive pullbacks.
Nvidia, in particular, shocked investors as it was, at one point on September 3, down 12%. Ultimately, it ended the day 9.53% in the red, with a modest decline persisting into the extended session.
In the cryptocurrency market, Bitcoin (BTC) briefly fell below $56,000 and, despite experiencing some recovery, remains well below its relatively stable recent levels near $60,000. BTC price today stands at $56,547.
As is frequently the case, most other major cryptocurrencies followed suit and are overwhelmingly in the red in the 24-hour charts.
Finally, the selling pressure has also seemingly spread to the commodity markets as gold experienced a sharp – yet limited as it amounts to no more than 0.42% by press time – drop. Oil likewise collapsed in price, erasing all prior 2024 gains.
What is next for the financial markets?
Analysts’ reaction to the downturn was mixed. Despite the dramatic price action, an air of calm persisted.
Jim Cramer, for example, made a series of X posts between September 3 and 4 in which he conceded the dip was ‘brutal’ and likely a ‘harbinger for more selling.’ Still, he overall appeared to take a stance that the drop was more the result of a temporary panic than the start of a major collapse or recession.
Part of the reason for the relative stoicism is that a September sell-off was broadly expected.
Fundstrat’s Tom Lee, for example, spoke in the Tuesday pre-market about a likely 7-10% stock market pullback but also explained that, while the situation will be unstable and dangerous, it may prove more of a ‘buy the dip’ opportunity than a start of something catastrophic.
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