Nvidia Plunges 10% as Market Faces September Slump

U.S. stock indexes faced their worst day in weeks, led by steep declines in major technology stocks like Nvidia, as investors grappled with ongoing concerns about global economic growth. The selloff, which saw trillions of dollars wiped from the stock market, underscores the heightened volatility that often characterizes September, a month historically challenging for equities.

On the first trading day of September, all three major U.S. stock indexes recorded their steepest declines since a sharp drop on August 5, driven by fears of a global economic slowdown. The S&P 500, a benchmark for the broader market, fell by 2.1%, marking a rough start to the month. The Dow Jones Industrial Average, which includes 30 large, publicly-owned companies in the U.S., dropped by 1.5%, or 626 points. The tech-heavy Nasdaq suffered the most, plummeting 3.3% as technology stocks took a significant hit.

The negative sentiment on Wall Street was exacerbated by a report from the Institute for Supply Management (ISM) released in the morning. The report showed that U.S. manufacturing activity in July was weaker than expected, intensifying investor fears about economic growth. The ISM’s report is closely watched as a leading indicator of broader economic trends, and the weak data added to concerns that the U.S. economy might be on the brink of a more significant slowdown.

These fears were compounded by the fact that September has been a particularly tough month for stocks in recent years. Historically, the stock market tends to perform poorly in September, and investors appeared to be positioning themselves cautiously in anticipation of further declines.

The selloff was particularly harsh on large technology companies, which are often seen as more vulnerable to economic slowdowns due to their high valuations. The six largest U.S. technology firms, each with market capitalizations exceeding $1 trillion, all saw their shares decline by more than 1%. Nvidia, a leader in artificial intelligence, led the losses with an 8% drop, while Apple, known for its iPhone, fell by 3%. The combined market value loss for Nvidia and Apple alone amounted to approximately $375 billion, highlighting the scale of the selloff.

The decline in Nvidia’s stock is particularly noteworthy given its strong performance earlier in the year. The company had been riding high on the growing demand for artificial intelligence technologies, which has been a key driver of its stock price. However, the broader market selloff, coupled with concerns about a slowing global economy, has now erased a significant portion of those gains.

The broader market slump, though modest in the context of the year’s gains— the S&P 500 had risen by 19% year-to-date—evokes memories of past September struggles. The S&P 500 saw declines of 3.9% in September 2020, 4.8% in September 2021, 9.3% in September 2022, and 4.9% in September 2023. This translates to an average drop of 5.7% over the past four years, reinforcing the month’s reputation as a challenging period for investors.

Adding to the market’s woes, oil prices fell to their lowest levels of the year on Tuesday. Brent Crude, the international oil benchmark, dropped nearly 5% to below $74 per barrel by midmorning, marking its lowest price since December 2023. The decline in oil prices followed reports of a fourth consecutive month of declining manufacturing activity in China, the world’s largest oil importer. This data stoked fears about weakening global demand for oil, particularly as China’s economic growth continues to slow.

The concerns about China’s economy were further amplified by a note from Bank of America economists Claudio Irigoyen and Antonio Gabriel, who cut their forecasts for China’s economic growth in 2024 and 2025 from 5% to 4.8%. The economists warned that China’s economy is “sputtering,” raising concerns about the global impact of its slowdown, particularly on commodity prices like oil.

Tom Essaye, an analyst at Sevens Report, noted in a client memo that “demand worries linked to the threat of a slowdown in global growth are acting as the biggest influence on the oil market right now.” Lower oil prices, while often welcomed by consumers due to their impact on gasoline prices, can be a harbinger of broader economic difficulties, as they signal reduced demand from companies, consumers, and governments.

Historically, sharp declines in oil prices have often preceded broader economic downturns. For example, Brent crude prices fell by 62% during the 2008 global financial crisis and by 24% during the COVID-19 pandemic in 2020. The current drop in oil prices could similarly signal growing economic challenges ahead.

As of Tuesday, Americans were already feeling the impact of lower oil prices at the gas pump. The average price of gasoline in the U.S. was $3.33 per gallon, down from $3.48 a month ago and $3.82 a year ago, according to AAA. This decline in gas prices has contributed to a reduction in inflation, offering some relief to consumers amid broader economic uncertainties.

Looking ahead, financial markets are also likely to be influenced by the upcoming U.S. presidential election in November. Deutsche Bank strategist Jim Reid noted that the election could become one of the biggest issues for markets over the next two months, given the stark differences between the candidates’ economic proposals. This political uncertainty, combined with ongoing economic concerns, suggests that the volatility seen in early September could persist in the coming weeks.