To The Moon

The new month saw the stock market started sharply lower with the major US indices plunged to kick off a shortened trading week after Labor Day as the latest Purchasing Managers Index (PMI) data indicated a contraction in manufacturing activity in August.

There was a brief plateauing around mid-day. Selling picked up again in the afternoon trade, leading the Dow Jones Industrial Average to settle more than 600 points lower. The Nasdaq Composite closed nearly 600 points lower, the S&P 500 declined more than 100 points, and the Russell 2000 shed 3.1%.

Economic data gives investors concerns for worries as contraction seen in manufacturing. With August S&P Global US Manufacturing PMI - Final came in at 47.9 lower than the previous value of 48.0. August ISM Manufacturing Index was 47.2% slightly lower than the consensus at 47.5% while previous was 46.8%.

The key takeaway from the report is that it has reinforced the understanding that conditions in the U.S. manufacturing sector are weak. Similarly we saw that the new single-family construction was weak in July, with July Construction Spending lower at -0.3% than consensus at 0.2% while the previous was revised to 0.0% from -0.3%.

Concerns Of Weaker Labor Market This Week In Focus

With the manufacturing woes reigniting concerns about a possible economic slowdown, the labor market will likely take the spotlight later in the week. Reports on job openings and private-sector hiring will culminate Friday in the release of the August employment numbers.

Volume increased today after running below average in recent weeks. The downside bias was related to normal consolidation activity, sparked by growth worries after China's Manufacturing PMI for August showed a deepening contraction.

Note Yield Lower Amidst Growth Concerns

Treasury yields settled lower in response to the growth concerns and soft economic data. The 10-year note yield fell thirteen basis points to 3.825% and the 2-year note yield settled one basis points lower at 3.863%.

Also, the CBOE Volatility Index was up 33%, or 5.55, to 20.72 with participants hedging for the possibility of further downside.

S&P 500 Only 2 Sectors Managed Gains

With the downside ride, the equal-weighted S&P 500 settled 1.3% lower and nine of the 11 S&P 500 sectors registered losses.

The information technology sector was the biggest losers logged -4.43% due to weakness in its mega cap and semiconductor components. The PHLX Semiconductor (SOX) sank 7.8%. NVIDIA (NVDA) was an influential loser in the space, falling under profit-taking interest.

Energy sector was next laggard with -2.41% loss dropping alongside oil prices in another manifestation of growth worries. WTI crude oil futures fell 4.3% to $70.37/bbl.

Only consumer staples and real estate managed to post positive gains less than 1%.

Stocks To Watch

Shares of Texas-based power generator Vistra (VST) plummeted more than 11%, the biggest drop of any S&P 500 stock. The company has drawn attention because of opportunities associated with demand for power from data centers running artificial intelligence (AI) technology and oil field operations. That had helped the stock gain more than 120% year to date heading into Tuesday's session.

$GitLab, Inc.(GTLB)$ shares surged 9.5% in after-hours trading following its fiscal Q2 results that exceeded expectations and an upward revision of its full-year outlook. GitLab reported an adjusted $0.15 per share, with revenue rising 31% year-over-year to $182.6M. Analysts had expected an adjusted $0.10 per share on $177.15M in revenue.

We are going to see a reversal after GTLB post an earnings that exceed expectations and this will change what the technical MACD is showing and we could expect a bullish crossover soon. And this should also help the KDJ to make a reversal to the upside.

Semiconductor stocks, including Nvidia (NVDA), Intel (INTC), and AMD (AMD), saw significant declines on Tuesday. Nvidia dropped 9.5%, erasing nearly $280B in market value, while AMD fell 7.8%. Intel shares also fell over 8.5%, giving up gains from last week. The sector is awaiting $Broadcom(AVGO)$ quarterly results later this week.

Can we see a winner in AVGO following the significant declines from big semiconductors name on Tuesday, from the technical, it does not look good as AVGO is heading to the downside with a bearish crossover formed at MACD and KDJ is showing a clear downside movement.

So we need a significant and exceptionally earnings results and outlook from AVGO in order to turn the tide and also to get AVGO to be the sole winner in the semiconductor space.

Shares of The $Coca-Cola(KO)$ rose for the seventh consecutive day, closing up 0.75% at $73.02. The stock has gained about 24% in the last 12 months and 23% year-to-date. Analysts have a Hold rating on the company, citing its yield below 3% and high forward P/E ratio.

Looks like investors have plans to turn to defensive stocks as we could see that consumer staples sector in the S&P 500 are gaining +0.76% and one of the winner is KO, it has rose for seventh consecutive day.

From the technical, MACD is showing a clear upside movement and KDJ is making a slight adjustment so there might be more upside if KDJ could break into an upside move clearly.

Super Micro Computer (SMCI) CEO Charles Liang reassured customers that recent events, including a delay in its annual report and a short disclosure by Hindenburg Research, would not impact the company's operations. Shares were down following the news.

Summary

From what we have seen on Tuesday (03 Sep) first day of new month trading, it looks like investors are already planning to turn defensive and also profit taking, we could expect more downside from the usual sector like information technology and communication services.

There might be chance to still make profit from the consumer staples and real estate as these are sectors that might benefit from possible rate cut, but the growth concerns from weak manufacturing number might keep the Fed at bay, if labor data turned out to be weak on Friday, could we see Fed delaying the rate cut again?

Appreciate if you could share your thoughts in the comment section whether you think further weak labor data might have the Fed to rethink about its rate cut decision?

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.