US stock futures fell in Asian trading after the S&P 500 shed more than 2%.
Dow e-minis were down 149 points, or 0.36%, S&P 500 e-minis were down 31.75 points, or 0.57%, and Nasdaq 100 e-minis were down 154 points, or 0.81%.
“The extent of that Aug. 5 move probably burnt more than a few and it’s hard to get past those memories especially as the hard landing versus soft landing confusion is still unsettled,” said Charu Chanana, head of FX strategy at Saxo Markets in Singapore. “I would be rather cautious here” as soft data will raise recession concerns while positive data will ease rate-cut expectations, she added.
The early-August selloff turned out to be a pause in the bull market than the beginning of a prolonged slide, as growing expectations for US rate cut erased the slump in a matter of days. The recovery gained momentum following dovish comments from Federal Reserve Chair Jerome Powell at the Jackson Hole symposium.
“The harsh selloff on Wall Street was a stark reminder that September has a bad reputation for wavering risk appetite,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank in Singapore, adding that the situation may be exacerbated by US recession risks and unwinding of the yen carry trade.
Traders are anticipating the Federal Reserve will reduce rates by more than two full percentage points over the next 12 months — the steepest drop outside of a downturn since the 1980s.
Marking the start of a busy week for economic data, a report showed US manufacturing activity shrank in August for a fifth month. Focus will turn to the key US jobs report due later this week. The data is expected to show payrolls in the world’s largest economy increased by about 165,000, based on the median estimate in a Bloomberg survey of economists.
The S&P 500 dropped to around 5,530 while the Nasdaq 100 lost over 3% as Nvidia tumbled 9.5% — erasing $279 billion in a record one-day wipeout for a US stock. The US Justice Department sent subpoenas to Nvidia and other companies as it seeks evidence that the chipmaker violated antitrust laws.
The risk-off mood at the start of historically tough month for markets came as a closely watched US manufacturing gauge again missed forecasts, shifting investor focus toward the odds of an economic slowdown in the world’s largest economy.
The S&P 500 and the Nasdaq 100 saw their worst starts to a September since 2015 and 2002, respectively. With inflation expectations anchored, attention has shifted to the health of the economy as signs of weakness could speed up policy easing. While rate cuts tend to bode well for equities, that’s not usually the case when the Fed is rushing to prevent a recession.