Kospi: US Markets Plunge as September Trading Begins: Sensex and Nifty Follow Suit
The US stock market experienced a sharp sell-off on Tuesday, with the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all posting significant losses. The sell-off, which was the worst since early August, came as investors braced for a challenging September and a data-heavy week ahead.
The Nasdaq Composite dropped 3.26% and settled at 17,136.30, while the S&P 500 dove 2.1% to 5,528.93. The Dow tumbled 1.5% to 40,936.93, pulling back from the record closing high set in the previous session.
The sell-off was led by semiconductor stocks, with the Philadelphia Semiconductor Index plunging 7.8%. Nvidia (NVDA), a leader in the AI market, saw its stock drop by 9.5%. Oil service stocks also faced significant weakness amid a steep drop in crude oil prices.
The sell-off was triggered by a report from the Institute for Supply Management (ISM) showing a continued contraction in U.S. manufacturing activity in August. The ISM manufacturing PMI inched up to 47.2 in August from 46.8 in July, but a reading below 50 still indicates contraction.
The weak manufacturing data reignited fears of a potential recession in the U.S. economy, leading investors to take a more cautious stance as September trading began. September has historically been the weakest month on average for the S&P 500 over the past decade.
The sell-off in U.S. markets had a ripple effect on global markets, with Asian markets also opening lower on Wednesday. Japan’s Nikkei 225 led the losses in the region, sliding more than 3%, while the broad-based Topix was down 2.74%.
South Korea’s Kospi had shed 2.61% at open, while the small-cap Kosdaq had dropped 2.94%. Australia’s S&P/ASX 200 was down 1.46%, and Hong Kong’s Hang Seng index futures were at 17,487, lower than the HSI’s last close of 17,651.49.
The Indian equity benchmark indices BSE Sensex and Nifty 50 were also headed for a gap-down start on Wednesday, with GIFT Nifty futures trading at 25,171, nearly 200 points behind Nifty futures’ last close.
The IT sector was among the worst hit in the Indian market, with the Nifty IT index slipping into the red as concerns over a U.S. slowdown weighed on the sector. Stocks of companies like Wipro and Mphasis fell over 3%.
Despite the sell-off, some analysts remain optimistic about the long-term prospects of the market. Henry Allen, a macro strategist at Deutsche Bank, noted that after the initial sell-off on August 5, a sense of stability began to return to the markets, partly aided by more encouraging data concerning the U.S. economy.
Investors will be closely watching the upcoming economic data releases, particularly the August jobs report on Friday, which could influence the Federal Reserve’s decision on interest rates this month.
The sell-off in U.S. markets and the subsequent impact on global markets serve as a reminder of the volatility and uncertainty that can characterize the stock market, especially during challenging economic times. As investors navigate the challenges of September, they will need to stay vigilant and adapt their strategies accordingly to weather the storm.
