**Stocks Plummet Following Last Week’s Gains**On Tuesday, stocks experienced a significant decline, erasing the robust gains reported last Friday. The Dow Jones Industrial Average pulled back sharply from its record-high close in the previous session.Despite recovering slightly from the day’s lowest levels by the close, major indices still recorded considerable losses. The Nasdaq dropped 577.33 points, or 3.3%, to settle at 17,136.30. The S&P 500 fell by 119.47 points, or 2.1%, concluding at 5,528.93, and the Dow Jones dipped 626.15 points, or 1.5%, to finish at 40,936.93.**Economic Data Fuels Concerns**The sell-off coincided with a report from the Institute for Supply Management (ISM) that showed continued contraction in U.S. manufacturing activity for August. The ISM’s Manufacturing PMI rose slightly to 47.2 from July’s 46.8, but Readings below 50 indicate continued contraction. Economists had anticipated a rise to 47.5.This data rekindled concerns over the economic outlook, further intensifying the sell-off initially observed in early August.”Manufacturing employment has shrunk for the third consecutive month as activity has slowed,” commented Jeffrey Roach, Chief Economist for LPL Financial. “While the manufacturing sector contributes less to the macroeconomy than in past cycles, investors should brace for a broader slowdown this year.”Additionally, the Commerce Department released an unexpected report indicating a modest decline in U.S. construction spending for July.**Interest Rate Speculations and Job Data**The market turmoil also reflected traders’ efforts to capitalize on gains from the previous session amid ongoing uncertainty about future interest rate trends. The Federal Reserve is widely anticipated to lower rates at its upcoming meeting, though opinions differ on the scale of the reduction.According to CME Group’s FedWatch Tool, there is a 63% chance of a quarter-point rate cut later this month, alongside a 37% chance for a half-point cut.Economists are looking ahead to the monthly jobs report later this week, forecasting an addition of 165,000 jobs in August, following July’s increase of 114,000 jobs. The unemployment rate is expected to edge down to 4.2% in August from 4.3% in July, the highest since October 2021.**Sector Performance**Semiconductor stocks, which performed strongly last Friday, saw a sharp decline. The Philadelphia Semiconductor Index plummeted by 7.8%, with Nvidia (NVDA) falling 9.5%.Steel stocks also experienced notable weakness, as evidenced by a 5.1% drop in the NYSE Arca Steel Index. U.S. Steel (X) contributed to this sectoral decline, falling 6.1% after Vice President Kamala Harris opposed the company’s sale to Japan’s Nippon Steel.Oil service stocks faced considerable pressure due to a significant fall in crude oil prices, causing the Philadelphia Oil Service Index to drop by 4.9%.Gold, computer hardware, and housing stocks also saw declines, while utilities stocks, sensitive to interest rates, largely resisted the overall downward trend.**Global Market Reactions**In overseas markets, Asia-Pacific stock markets showed modest weakness on Monday. Japan’s Nikkei 224 Index closed marginally below the unchanged line, and China’s Shanghai Composite Index dipped by 0.3%.European markets posted more substantial declines, with Germany’s DAX Index falling by 1.0%, France’s CAC 40 Index slipping by 0.9%, and the U.K.’s FTSE 100 Index decreasing by 0.8%.In the bond market, treasuries regained ground after previous sessions of decline. Consequently, the yield on the ten-year note fell by 6.7 basis points to 3.844%.**Outlook**Investors will closely watch reports on the U.S. trade deficit, factory orders, and job openings on Wednesday, along with the Federal Reserve’s Beige Book.The material has been provided by InstaForex Company – www.instaforex.com
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