In a single day, $1.05 trillion was wiped off the U.S. stock market. The drop is one of the largest in a single day in recent memory and also reflects a mix of unsatisfactory economic data and huge problems among major companies.
Investors are understandably shocked, as this downturn raises some very troubling questions about the stability of this market.
Stock Market: Economic Data Drives Decline
The Dow Jones Industrial Average immediately dropped more than 626 points within the first seconds of the open. By the close, the index dropped more than 700 points, ending down more than 2% at around 40,936.93.
This sell-off was fueled by weak manufacturing data, a fifth straight month of contraction. Investors were rattled by this news, eventually leading to massive sell-offs across the board.
The S&P 500 also lost about 2.4%, closing at around 5,530 points. Technology was the hardest hit during his period, particularly Nvidia, whose shares fell 9.5%. This is the biggest one-day stock drop for a U.S. company, wiping an astonishing $279 billion off its market value.
Crude oil prices fell to $72.66 a barrel, reflecting concerns over global demand and worsening market woes.
The US stock market fell by $1.05 trillion today. Crypto remained relatively stable. photo.twitter.com/mO6xdCGkni
—MartyParty (@martypartymusic) September 3, 2024
Nasdaq, the hardest hit
The Nasdaq Composite was the weakest of the majors, falling nearly 3.5 percent to 17,136.30, its worst day since early August. Because the Nasdaq is overweight in technology stocks — even more so after Nvidia’s collapse — it suffered heavy losses.
As tech stocks continue to fall, investors are left guessing how long this will last and what it could mean for the broader market.
Image: Daily Sabah
Impact on cryptocurrencies
Oddly enough, while the stock market was going crazy, cryptocurrency just as Bitcoin and Ethereum remained somewhat resilient. Bitcoin lost 3% of its value, while Ethereum fell below US$2,500.
History also shows that September is the toughest month for stocks and cryptocurrencies. Typically, there is higher volatility as traders prepare for monthly economic reports and interest rate changes.
BTC market cap currently at $1.16 trillion. Chart: TradingView.com
Bitcoin Market Cap Stable
Despite the current downturn, Bitcoin’s market cap is still healthy at around US$1.2 trillion, with a year-on-year return of 128%.
The short-term outlook is rather bleak, but some analysts are cautiously saying that a recovery is on the cards. They base their optimism on the upcoming US elections and the planned $14.5 billion payout to FTX creditors.
However, everything depends on what is reported on future economic data. If the weak reports continue, more pain could be on the horizon.
But what really underscores a greater degree of uncertainty is the $1.05 trillion loss suffered by the U.S. stock market. As investors try to navigate the fallout from weak economic data and big drops in major companies, all eyes are on the next round of reports and political stuff to come out.
Of course, some feel the bottom, but there are still challenges ahead of them. How long it will actually take for this sector to climb out of the valley is still the question.
Main image from TipRanks, chart from TradingView