In a single day, $1.05 trillion was wiped out of the US stock market. This decline represents one of the largest of any single day in recent times and also reflects a mix of unsatisfactory economic data and huge struggles among major companies.

Investors are understandably rattled because this downturn brings up some seriously unsettling questions about the stability of this market.

Stock Market: Economic Data Drives The Decline

The Dow Jones Industrial Average plummeted more than 626 points right off the bat within the first seconds of the opening. At close, it shed more than 700 points and ended down over 2% at about 40,936.93.

This sell-off was catalyzed by weak manufacturing data, a fifth consecutive month of contraction. Investors were rattled by this news, and that eventually led to massive sell-offs across the board.

The S&P 500 also lost around 2.4% to close at approximately 5,530 points. Technology was worse hit in its period, especially Nvidia, the shares of which tumbled by 9.5%. This is the biggest one-day share fall for any American company, which erased an astonishing $279 billion off its market value.

Crude oil fell back to $72.66 a barrel, reflecting further concerns over global demand and adding to the market’s tribulations.

US Stock Market value lost $1.05 trillion today. Crypto remained relatively stable. pic.twitter.com/mO6xdCGkni

— MartyParty (@martypartymusic) September 3, 2024

Nasdaq, The Hardest Hit

The Nasdaq Composite was the weakest among the majors, falling nearly 3.5% to 17,136.30. That was its worst day since early August. Because the Nasdaq is overweight in technology stocks- even more so after the collapse of Nvidia- it sustained heavy losses.

As the tech stocks continue sliding, investors are left to guess just how much further that may last and what it could mean to the broader market.

Image: Daily Sabah

Impact On Cryptocurrencies

Curiously, as the stock market was going haywire, cryptocurrencies like Bitcoin and Ethereum somewhat remained resilient. Bitcoin shed 3% of its value, while Ethereum went below US$2,500.

History would also show that September has been the most trying month for stocks and cryptocurrencies. It usually sees increased volatility from traders who prepare for monthly economic reports and interest rate changes.

BTC market cap currently at $1.16 trillion. Chart: TradingView.com

Bitcoin Market Cap Steady

Despite the downturn these days, Bitcoin’s market capitalization is still faring healthy at around US$1.2 trillion, with a year-over-year return of 128%.

The short-term outlook is quite bleak, but some analysts cautiously say a recovery could be in the cards. They peg their optimism on the upcoming elections in the United States and the planned disbursal of $14.5 billion to FTX creditors.

However, everything depends on what is going to be reported about future economic data. In case weak reports continue, then more pain might be in store.

But what really emphasizes a higher magnitude of uncertainty is the $1.05 trillion loss the US stock market had to incur. As investors try to work their way through the ramifications brought about by weak economic data and major declines in key companies, all eyes are on the next set of reports and political affairs that come out.

Obviously, some feel a bottom, but ahead of them are challenges, and how long it will actually take for this sector to climb out of its hole is anybody’s guess.

Featured image from TipRanks, chart from TradingView