Wall Street Faces Volatility as Yen Surges, Oil Sinks, and Tech Stocks Slide

The first trading session of September opened with a broad selloff across Wall Street, marking a challenging start to what is historically a volatile month.

The S&P 500 dropped by 1.6%, while small-cap stocks plummeted 2.7%. Even the Nasdaq 100 was down 2.5%, recording its worst one-day drop since August.

Well, if anyone was looking for some insights today, SPY and QQQ bottomed really nicely from some very large put spikes. All the delta/gamma too has been bullish. I think this YEN stuff is just more fear being pumped in tbh. Not sure if it'll actually go and collapse the market. pic.twitter.com/ZVmIvIqzmm

— SpyGlass (@Spyglassflow) September 10, 2024

Key Takeaways:

• Wall Street’s selloff pushed the S&P 500 and Nasdaq into their steepest declines since early August.
• The CBOE Volatility Index (VIX) surged 20%, reflecting growing investor anxiety about the coming months.
• WTI Crude Oil fell below $70, marking its largest one-day drop since October 2023.
• Tech stocks, particularly chipmakers like Nvidia and AMD, suffered severe losses, with Intel dropping 7.5%.
• The market now awaits crucial inflation data and earnings from Adobe and Kroger.

The notable surge in the CBOE Volatility Index (VIX), often known as Wall Street’s “fear gauge,” spiked by 20%, reflecting growing concerns among investors.

The sudden rise in volatility can be linked to several factors, including concerns over the global economic outlook, geopolitical tensions, and market uncertainty heading into September.

Tuesday’s selloff mirrored the chaos seen during the summer when the yen-dollar carry trade began to unwind. This time, the yen surged by 0.8% against the U.S. dollar after hawkish remarks from Bank of Japan Governor Kazuo Ueda. Despite this, the U.S. dollar still managed to gain 0.2% against a basket of other currencies.

Economic Data Fuels Speculation of Fed Rate Moves

Amid the market’s turbulence, U.S. economic data painted a picture of growing uncertainty. The latest manufacturing data for August revealed a deeper-than-expected contraction.

The manufacturing employment index further highlighted challenges, amplifying concerns about the upcoming jobs report.

11/ 🟢 While real interest rates have risen, some argue the Fed’s policy isn’t tight, citing favorable financial conditions and economic resilience.

• Fed’s Rate Cut Signals
• Consumer Spending vs. Income
• Stable Inflation
• Rate Cut Expected pic.twitter.com/wOrvquTPu7

— arndxt (@arndxt_xo) September 9, 2024

Treasury yields reacted immediately, with the yield on the two-year Treasury note falling by 3 basis points and the 10-year Treasury note down by 7 basis points.

These drops fueled speculation that the Federal Reserve may be pushed toward cutting interest rates. The iShares 20+ Year Treasury Bond ETF (NASDAQ) rose 1.2%, signalling that investors expect potential shifts in monetary policy.

The market is now bracing for key inflation data sets to be released tomorrow. Forecasts for U.S. Core CPI indicate a 0.2% m/m increase, with the year-over-year CPI expected to reach 2.5%.

This data will play a crucial role in shaping investor sentiment on future Fed actions, particularly regarding interest rates.

Oil Prices Sink Below $70 Amid Weak Demand

While market volatility and currency fluctuations dominated headlines, oil prices experienced a dramatic fall. West Texas Intermediate (WTI) crude oil dropped over 4%, sinking to levels not seen since January 2024.

Concerns about slowing global demand and potential increases in OPEC output next month are driving WTI’s price below $70 right now.

Oil prices tumble to their lowest level since Dec 2021 on global growth worries. Brent crude dropped <$70/bbl after the Saudi-led OPEC cut its growth projections for the world's appetite for oil. pic.twitter.com/QJSqCqrHjp

— Holger Zschaepitz (@Schuldensuehner) September 10, 2024

Analysts were quick to note that the sharp drop in oil prices was the steepest one-day decline since October 2023. While supply disruptions from Hurricane Francine momentarily buoyed prices, worries about broader demand—particularly from China and Europe—outweighed supply concerns.

Gold didn’t fare much better, with prices slipping 0.5%. The overall bearish tone in commodities reflects broader anxieties over the global economic landscape.

Meanwhile, cryptocurrency markets also took a hit, with Bitcoin (BTC) dropping 2.5%, continuing its struggle in the face of weak investor sentiment.

Tech Stocks and Chipmakers Take a Beating

Tech stocks, particularly in the semiconductor sector, faced significant losses. Nvidia (NASDAQ: NVDA), a major player in the AI and chip sectors, fell 7.6%, marking its worst one-day drop since April.

Other notable names in the chip industry, such as Marvell Technologies (NASDAQ: MRVL) and Advanced Micro Devices (NASDAQ: AMD), declined by 7.3% and 6%, respectively.

The broader tech sector also struggled, with the Invesco QQQ Trust Series (NASDAQ: QQQ) dropping 2.4%. Among tech giants, Intel Corp. (NASDAQ: INTC) saw a staggering 7.5% fall amid news that the company may be removed from the Dow Jones Industrial Average.

The past fortnight may have raised headlines around a market top, but not all sectors are made equal. Notably, it is the information tech and telecoms leading those declines, with the heavy weighting of those sectors ensuring the market heads lower.

Meanwhile, Real estate,… pic.twitter.com/FBbXd0LzYL

— Joshua Mahony (@JoshuaMahony) September 10, 2024

Adding to the market woes, Boeing Company (NYSE: BA) dropped almost 8% following a downgrade by Wells Fargo, which slashed its price target and gave the stock an Underweight rating. This steep decline in Boeing’s stock further fueled negative sentiment across major indices.

Looking Ahead: Key Events and Earnings

The focus now shifts to key economic events and earnings reports set for later this week. Tomorrow’s release of Core PPI data, unemployment claims, and CPI reports will likely shape market direction. Any deviations from the expected figures could further unsettle already nervous investors.

In terms of earnings, Adobe (NASDAQ: ADBE) and Kroger (NYSE: KR) are set to release their reports tomorrow. With Adobe’s revenue forecast at $5.37 billion, investors will be keenly watching for any signs of strength or weakness in the tech giant’s performance.