The stock market began September on a defensive note with a broad-based retreat that sent the S&P 500 lower by 3.0%. The benchmark index widened its Q3 loss to 7.0% while the Dow (-2.8%) and Nasdaq Composite (-2.9%) spent the day just ahead of the S&P 500.
Equity indices slumped at the start, responding to the overnight weakness in the futures market. To that point, index futures began retreating shortly after yesterday's closing bell and extended their losses during the Asian session with disappointing manufacturing data from China contributing to the cautious posture. Specifically, the official Manufacturing PMI slipped to 49.7 from 50.0 while the Caixin Manufacturing PMI ticked up to 47.3 from 47.2, but both readings came in below 50.0, which signifies contraction. The Shanghai Composite began the month with a 1.2% slide while the disappointing data from China reminded global investors about the persistent growth concerns.
Investor sentiment saw little improvement during the European session as Germany's DAX, France's CAC, and UK's FTSE retreated throughout the day, posting losses between 2.4% and 3.0%. Once the U.S. session got going, equity indices retreated with dip-buyers showing little willingness to step into the fold. The second-largest sector by weight—financials (-3.5%)—underperformed throughout the day, which short-circuited any and all attempts at a rebound.
Similar to financials, the energy sector (-3.7%) displayed relative weakness since the opening bell. Crude oil continued its wild ride, which contributed to the daylong underperformance in the sector. The energy component plunged 7.7% to $45.41/bbl on Tuesday after soaring nearly 30.0% during the previous three sessions.
Elsewhere, the top-weighted technology sector (-3.4%) traded ahead of the broader market during morning action, but slipped behind the S&P 500 during the final hour as stocks headed to new lows for the day. The late selling was met with new highs in the CBOE Volatility Index (VIX 32.29, +3.86), which climbed into the 32.0% area as investors piled into downside protection.
With the key indices losing close to 3.0% apiece, more than 2700 NYSE-listed stocks ended the day with losses while only 428 issues registered gains.
The sell-off invited above-average trading volume as more than a billion shares changed hands at the NYSE floor.
Interestingly, Treasuries set their highs during overnight action and spent the day just below those highs while equities retreated. As a result, the 10-yr yield fell five basis points to 2.17%.
Economic data was limited to Construction Spending and ISM:
- Construction spending increased 0.7% in July after increasing an upwardly revised 0.7% (from 0.1%) in June while the consensus expected an increase of 0.5%
- Private residential construction increased 1.1% in July, up from a 0.9% increase in June
- Private nonresidential construction spending rebounded in July, rising 1.5% after declining 0.7% in June
- Big reversals were recorded in the manufacturing (4.7% from -0.5%) and power (2.1% from -0.7%) sectors while spending on lodging (-1.1%) and commercial (-1.0%) buildings declined
- The ISM Manufacturing Index declined to 51.1 in August from 52.7 in July while the consensus expected a decline to 52.6
- The August decline came during a period where multiple regional Federal Reserve manufacturing surveys showed sizable contractions in manufacturing activities
Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while the August ADP Employment Change survey (consensus 203K) will cross the wires at 8:15 ET. Q2 Productivity and Unit Labor Cost data will follow at 8:30 ET while the Factory Orders report for July (consensus 0.9%) will be reported at 10:00 ET. The day's data will be topped off with the 14:00 ET release of the Federal Reserve's September Beige Book.
- Nasdaq Composite -2.1% YTD
- S&P 500 -7.0% YTD
- Russell 2000 -6.5% YTD
- Dow Jones Industrial Average -9.9% YTD
Closing Market Summary: Persistent Growth Concerns Send Stocks Lower