Markets slide further after a weak ISM manufacturing data report

Dow tumbled 626 (near session lows), decliners over advancers 5-2 & NAZ dropped 577.  The MLP index pulled back 3+ to the 283s & the REIT index was off 1+ to 426.  Junk bond funds remained weak & Treasuries continued in demand, bringing lower yields.  Oil sank 3+ to a little over 70 & gold was off 6 to 2520 (more on both below).

Dow Jones Industrials 

Semiconductor stocks, led by Nvidia (NVDA), fell during an overall down day for the stock market.  The SMH, an index that tracks semiconductor stocks, was down 6%, on pace for its biggest 1-day loss in a month.  Markets were sluggish today after the ISM manufacturing index reported Aug figures that came in below consensus expectations, raising fears about the strength of the economy but also potentially increasing chances that the Federal Reserve will cut interest rates.  Chip stocks have been rising in the past year on optimism that the artificial intelligence boom will require companies to buy more semiconductors & memory to keep up with rising computational requirements for AI applications.  The sector has been led by NVDA, which is still up nearly 129% so far in 2024, & which dominates the market for AI data center chips.  Last week, NVDA reported $30B in quarterly earnings for the qtr ending in Jul, higher than the already elevated expectations.  Revenue in the company's data center business, which includes AI processors, climbed 154% on an annual basis, partially powered by a handful of cloud & internet giants that buy Bs of $s of NVDA chips each qtr.   NVDA expects 80% sales growth in the current qtr.  But some investors saw NVDA's forecast last week as a slowdown in growth, briefly hitting chipmakers that supply NVDA with memory & other parts.  NVDA stock sank 11.22.

Nvidia tumbles, leading chip stocks lower

Spaceship. Dream car. UFO. Dumpster. Cool. Stupid. Phenomenal. Abomination.  Those were all words used to describe the Tesla (TSLA) Cybertruck during a 24-hour rental of the vehicle in metropolitan Detroit.  They were expressed by strangers, friends, family & auto industry experts & employees.  A word not used much? “Truck.”  That's because the Tesla Cybertruck is far more “cyber” than “truck.”  It indeed has some truck capabilities, such as a pickup bed & other utilitarian features, but it is not a truck in any traditional sense of the word.  It is a unique product that only comes along every so often.  Similar to the first SUV, minivan or “roadster pickups” such as the Ford Ranchero (F) & Chevrolet El Camino, it has created a new segment in the automotive industry that it solely holds.  That's good & bad for both TSLA & its competitors, specifically the truck-reliant automakers from Detroit that have spent decades refining their trucks to meet the needs of their customers.  That includes things such as bed access & door handle sizes to seating height & interior components.  The Cybertruck is not a direct competitor for electric trucks from traditional automakers.  The Cybertruck is a “truck” for TSLA fans/owners & an experiment for the company in many ways regarding its technologies, including a new electrical architecture & steering system.  TSLA stock fell 3.52.

Tesla Cybertruck is in a category of its own for better or worse

Volkswagen targeting €10B in savings by 2026 as it attempts to streamline spending.  Thomas Schaefer, head of the VW brand, warned: “The situation is extremely tense and cannot be overcome by simple cost-cutting measures.”  Pushing the changes thru will be a delicate task.  VW employs around 650K workers globally, almost 300K of whom are in Germany, & the threat of factory closures sparked an immediate fierce backlash from unions.  ½ the seats on the company's supervisory board are held by worker representatives, & the German state of Lower Saxony, which owns a 20% stake, often sides with trade union bodies.  Daniela Cavallo, chief exec of the VW works council, said on VW's intranet that management had made “many wrong decisions” in recent years, including not investing in hybrids or being faster at developing affordable battery-electric cars.  She argued that instead of plant closures, the board should be reducing complexity & taking advantage of synergies across the VW group's plans, criticizing the company's “documentation madness” & “salami-slicing tactics.”

VW considers closing German factory for first time in 87-year history

Gold prices eased to their lowest in more than a week, pressured by a firm $, while investors awaited US non-farm payrolls data that could determine the size of the potential cut in the Federal Reserve's Sep policy meeting.  Spot gold fell 0.4% to $2490 per ounce.  US gold futures settled 0.2% lower to $2523.  The dollar (.DXY), rose 0.2%, hitting a 2-week high, making gold more expensive for other currency holders.  Focus will be on Fri's US payrolls report along with ISM surveys, JOLTS job openings & the ADP employment report due later this week.  Markets are pricing in a 63% chance of a 25 basis point (bps) cut when the Fed meets on Sep 17-18, with a 37% probability of a 50-bps cut, the CME FedWatch tool, showed.  Bullion is heading for its best year since 2020, driven by investor optimism about upcoming US rate cuts & lingering concerns about the Middle East conflict.

Gold at Over One-Week Low on Firm Dollar, US Payrolls Data Awaited

Oil plummeted, erasing its gains for the year, after a prospective deal to restore supplies from Libya turned traders' attention back to concerns about tepid global demand for crude.  Global benchmark Brent dropped 4.9% to settle below $74 a barrel after earlier touching the lowest intraday price since mid-Dec 2023.  The plunge came after a Libyan central banker said a deal that would revive the OPEC nation's output appears imminent.  With more than 0.5M barrels of Libyan crude possibly coming back into the market, the focus is once again on tepid global oil consumption.  Economic concerns in key consumer countries, including China & the US, have weighed on sentiment in recent months, with only occasional geopolitical concerns & minor supply disruptions masking the angst.  Looking ahead, the market is bracing for OPEC+ to gradually restore production, starting with 180K barrels of daily supplies within weeks.  The concerns about China have only grown louder in recent days after a drumbeat of economic data over the weekend raised doubts that the world's top crude importer may struggle to meet this year's economic growth target.  Options are signaling the market is now anticipating a lower risk of futures spiking.  The bias toward puts in Brent's 2nd-month options skew has deepened to the most bearish since early Jun as traders continue to protect against price drops.  The US, meanwhile, is laying the groundwork for new sanctions on Venezuelan gov officials in response to Nicolás Maduro's disputed reelection.  The measures target key leaders that the US says collaborated with Maduro to undermine the Jul 28 vote.  WTI for Oct fell 4.4% from the Fri close to settle at $70.34 a barrel.  Futures didn't settle yesterday due to the Labor Day holiday.  Brent for Nov declined 4.9% to settle at $73.75 a barrel.

Oil Plunges as Rising Supplies, Tepid Demand Intensify Gloom

US stocks fell to kick off a historically tough month for markets.  Stocks are retreating from near highs as traders hunker down after a rollercoaster Aug, with the prospect of a potentially stormy Sep ahead which includes the Fed meeting.  Investors are assessing the risk of data shocks or presidential race surprises.