U.S. Stock Market Has a Turbulent Start to September Amid Rising Yields and Political Uncertainty

U.S. stocks closed sharply lower this Tuesday (3), marking a negative start to September, which is historically the worst month for the markets. Investors are focused on a crucial jobs report that could set expectations for interest rate cuts by the Federal Reserve (Fed).

Performance of Major Indexes:

• Dow Jones: fell 0.6% (about 250 points).

• S&P 500: dropped 0.7%, recording its worst day in over a month.

• Nasdaq: declined 0.8%, led by losses in the tech sector.

The Main Reasons for the Decline:

1. Rising Bond Yields: Long-term interest rates rose again, with the 30-year bond nearing the 5% mark once more—a level that pressures stock valuations.

2. Negative Spotlight on the AI Sector: Nvidia (NVDA) fell approximately 2% after addressing reports about its AI chip production capacity, dragging down other major tech stocks.

3. Political and Legal Uncertainties:

   • Trump's Tariffs: A federal appeals court ruled most of the global tariffs imposed by former President Donald Trump unconstitutional. Trump criticized the decision and vowed to appeal to the Supreme Court, creating uncertainty over trade policy.

   • Fed's Independence: Investors are also monitoring a legal battle over Trump's power to dismiss Fed members, such as Governor Lisa Cook, which brings the central bank's autonomy into focus.

What Investors Are Watching:

• Jobs Report: All eyes are on the August employment data, to be released on Friday. This is the most important indicator guiding the Fed's interest rate decision at its September meeting.

• Interest Rate Cut Expectations: The market is pricing in about a 90% probability of a 0.25 percentage point cut this month, also pushing gold to new record highs.

Economic Context:
Data released this Tuesday showed that U.S. manufacturing activity contracted for the sixth consecutive month in August, strengthening the argument for a loosening of monetary policy.