Nvidia Stock Plummets: £223bn Loss in Wall Street Sell-Off
American stock markets took a hit this afternoon as manufacturing in the world’s largest economy contracted for the fifth consecutive month. The news sent shockwaves through Wall Street, with more than £220bn wiped off the value of artificial intelligence giant Nvidia. The company saw its shares drop by nearly 8%, contributing to a 6.5% decline in the index of 30 leading US chipmakers. This significant drop comes less than a week after Nvidia’s quarterly financial results and forecasts disappointed investors, despite the company’s sales doubling.
The Nasdaq Composite fell by 2.4%, the S&P 500 by 1.4%, and the Dow Jones Industrial Average by 1%. These declines reflect growing concerns about the health of the US economy, particularly in the manufacturing sector. August manufacturing data from the Institute for Supply Management (ISM) revealed ongoing challenges, with the sector now in contraction for 21 out of the past 22 months. The institute’s purchasing managers’ index (PMI) for August was 47.2, a slight improvement from the 46.8 recorded in July. Any reading below 50 indicates contraction in the sector.
Timothy Fiore of the ISM commented on the subdued demand, stating that companies are hesitant to invest in capital and inventory due to current federal monetary policy and election uncertainty. This cautious approach by businesses is indicative of broader economic concerns that have been weighing on investor sentiment.
The market reaction to today’s news is largely driven by speculation about the Federal Reserve’s response to economic weakness. Sam Stovall, chief investment strategist at CFRA Research, noted that investors are anticipating the Fed will lower interest rates more aggressively in an effort to stimulate the economy. Many traders are expecting the Fed to implement a full percentage point of cuts to interest rates this year, a move that could potentially mitigate the risk of a recession.
The upcoming labor market reports scheduled for release this week, culminating in Friday’s non-farm payrolls data for August, will be closely watched by investors. The jobs market has been under increased scrutiny following July’s report, which hinted at a greater-than-expected slowdown. This led to a global selloff in riskier assets as concerns about the health of the US economy intensified.
Friday’s US jobs data is expected to influence the Federal Reserve’s decision on interest rates and could have significant implications for global markets. Stephen Innes, analyst at SPI Asset Management, described the upcoming data as a “significant litmus test” for the market. A stronger-than-expected payroll number coupled with a lower unemployment rate could instill confidence in investors and suggest that growth risks are easing. Conversely, a disappointing report that pushes the unemployment rate higher could reignite concerns about economic growth.
Analysts are cautioning investors about the historically challenging nature of September for US stocks. Sam North, of investment platform eToro, highlighted the data showing that the S&P 500 has historically returned an average of -1.17% in September between 1928 and 2023. This historical trend underscores the importance of monitoring market conditions and being prepared for potential volatility in the coming weeks.
Overall, the recent market volatility and economic uncertainties underscore the importance of staying informed and remaining vigilant in the face of changing economic conditions. Investors should closely monitor key indicators and market developments to make informed decisions about their portfolios in the current environment. Stay tuned for further updates on this developing story.
