Nasdaq Slumps 1.01% to 26,103.91 as Tech Sell-Off Intensifies; S&P 500 and Dow Also Decline on Rising Bond Yields and Oil Price Surge

Mumbai, Sept 1: US stock markets opened the first trading day of September in negative territory, with the technology-heavy Nasdaq Composite (^IXIC) leading the decline as it fell 266.98 points, or 1.01%, to trade at 26,103.91 during the early morning session. The sell-off, which began immediately after the opening bell, was driven by a confluence of factors including surging global bond yields, escalating crude oil prices, and renewed geopolitical tensions between the United States and Iran that have reignited inflation concerns among investors. 

The broader market weakness was evident across all three major indices, with the S&P 500 (^GSPC) dropping 48.12 points, or 0.63%, to 7,638.02, while the Dow Jones Industrial Average (^DJI) shed 255.09 points, or 0.48%, trading at 52,930.81 as of 9:51 AM Eastern Time. The Russell 2000 Index (^RUT), which tracks small-cap stocks, also declined by 21.31 points, or 0.72%, to 2,935.14, indicating broad-based selling pressure across market capitalisations. 

Tech Sector Leads Market Decline as Chip Stocks and Magnificent Seven Come Under Pressure 

The technology sector emerged as the primary drag on the broader market, with semiconductor stocks experiencing particularly sharp declines during the opening session. The Nasdaq 100 heatmap revealed widespread weakness among major technology names, with Nvidia (NVDA) falling 1.93%, while Advanced Micro Devices (AMD) dropped 2.41% and Micron Technology (MU) declined 2.52%. Intel (INTC) slumped 2.87%, and Broadcom (AVGO) fell 1.71%, reflecting investor concerns about the sustainability of the artificial intelligence-driven rally that has propelled these stocks to multi-year highs. 

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Among the Magnificent Seven mega-cap technology stocks, Tesla (TSLA) declined 2.67%, Amazon (AMZN) fell 1.55%, and Alphabet (GOOGL) dropped 0.73%. However, Apple (AAPL) bucked the trend, rising 1.25% on the first day of John Ternus’s tenure as Chief Executive Officer following the retirement of Tim Cook, who stepped down after a 15-year tenure at the helm of the world’s most valuable company. Microsoft (MSFT) declined 0.65%, while Meta Platforms (META) fell 0.91% and Netflix (NFLX) slipped 0.17%. 

The weakness in technology stocks was further exacerbated by declines in cybersecurity and cloud computing companies. Palo Alto Networks (PANW) tumbled 3.64%, CrowdStrike (CRWD) plummeted 4.19%, and Zscaler (ZS) fell sharply ahead of their quarterly earnings releases. Dell Technologies (DELL) declined 2.69% and Snowflake (SNOW) dropped ahead of its upcoming results, with options markets pricing in a potential swing of up to 10.5% following the company’s earnings report scheduled for Wednesday. 

US 10-Year Treasury Yield Surges to 4.78%, Highest Since January 2025 

Global bond yields continued their relentless climb on Tuesday, with the US 10-year Treasury note yield rising 3 basis points to 4.78%, reaching levels not seen since January 2025. The move higher in yields was driven by persistent inflation concerns and signals from Federal Reserve Chair Kevin Warsh last Friday that the central bank remains determined to bring inflation under control. The 30-year Treasury yield also climbed to 5.27%, hovering near multi-decade highs and adding pressure on equity valuations. 

The sell-off in government bonds was not confined to the United States. Japan’s 10-year government bond yield surged more than 6 basis points to reach 3% for the first time since August 1996, while the country’s 2-year government bond yield touched a 31-year high of 1.81%. In the United Kingdom, 10-year Gilt yields rose 10 basis points to 5.2501%, their highest level since June 2008 during the Global Financial Crisis, and the 30-year Gilt yield soared 10 basis points to 5.8909%, a level not seen since March 1998. German government bonds, typically viewed as a barometer for eurozone borrowing costs, also moved higher, reflecting the global nature of the bond market sell-off. 

The rise in yields has significant implications for equity markets, as higher borrowing costs reduce the present value of future earnings and make bonds more attractive relative to stocks. The yield on the 10-year Treasury note, which influences interest rates on a variety of consumer loans including mortgages, has now risen substantially from its lows earlier this year, adding to concerns about the sustainability of the economic recovery. Traders are now pricing in a 66% likelihood that the Federal Reserve will raise interest rates at its meeting later this month, according to the CME Group’s FedWatch tool, a significant increase from approximately 40% just one week ago. 

Crude Oil Prices Surge to $88.30 Per Barrel as Middle East Tensions Escalate 

Oil prices extended their recent rally on Tuesday, with US benchmark West Texas Intermediate (WTI) crude rising 3% to trade at $88.30 per barrel, while Brent crude futures, the global benchmark, advanced 2.4% to $92.65 per barrel. The surge in energy prices came after President Donald Trump told Fox News that “we’re going to hit them hard” following Iranian strikes on US military bases in Jordan, escalating tensions in the Middle East. 

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The geopolitical developments added another layer of uncertainty to markets already grappling with inflation concerns, raising fears that persistently higher oil prices could drive up cost inflation and affect the Federal Reserve’s monetary policy outlook. On Monday, a tanker passing through the Strait of Hormuz was hit by three unknown projectiles, marking the latest sign that the conflict could escalate and disrupt energy supplies through one of the world’s most critical shipping chokepoints. 

The impact of rising oil prices extends beyond energy markets, affecting household budgets and corporate profitability. A recent survey from Insurify showed that 69% of Americans are driving less to cope with high gas prices, which have risen significantly from the pre-conflict levels. A gallon of regular unleaded gas averaged $4.08 on Monday, according to AAA, up from $2.98 on the eve of the Iran war in February, reflecting the substantial impact of geopolitical tensions on energy costs. 

Energy stocks largely outperformed the broader market, with Exxon Mobil shares (XOM) rising 1.15% and Chevron (CVX) advancing 1.14% as higher oil prices supported their earnings outlook. Devon Energy gained 1.3%, and Hut 8 shares rose following reports of a planned data centre tied to an Anthropic-Lambda cloud deal. The divergence between energy stocks and the broader market highlighted how higher oil prices were supporting energy equities even as they added to wider inflation concerns that weighed on other sectors. 

Eurozone Inflation Accelerates to 3.3%, Cementing ECB Rate Hike Expectations 

Adding to the global inflation narrative, eurozone inflation rose to 3.3% in August from 2.9% in July, according to the European Union’s statistics office Eurostat. Higher energy costs were the primary driver of the increase, with energy inflation accelerating to 14.3% from 10.3% in the previous month. 

The data cemented market expectations for the European Central Bank (ECB) to raise interest rates in September, with a 25 basis point move higher to 2.5% almost fully priced in, according to LSEG data. The ECB’s next policy meeting is scheduled for Thursday, and the inflation reading is likely to strengthen the case for further monetary tightening as policymakers seek to bring price pressures under control. 

The combination of rising inflation in the eurozone and persistent inflation concerns in the United States has contributed to the global bond market sell-off, as investors adjust their expectations for central bank policy. The Federal Reserve’s focus remains on inflation, making incoming economic data critical for rate expectations. The central bank is slated to meet next in two weeks, and market participants will be closely watching the August jobs report due Friday for clues about the labour market’s resilience and its implications for monetary policy. 

Semiconductor Stocks Plunge as iShares Semiconductor ETF Drops 2.8% 

The semiconductor sector experienced one of the sharpest declines during the opening session, with the iShares Semiconductor ETF (SOXX) falling 2.8% and the Roundhill Memory ETF (DRAM) declining 2.5%. The weakness in chip stocks was widespread, with Lam Research (LRCX) dropping 2.89%, Applied Materials (AMAT) plunging 3.18%, and KLA Corporation (KLAC) falling 2.85%. 

Qualcomm (QCOM) declined 4.35%, Arm Holdings (ARM) fell 4.12%, and Marvell Technology (MRVL) tumbled 4.68% as investors rotated out of high-growth technology names amid rising bond yields. The chip sector’s decline was particularly notable given its strong performance earlier in the year, with many semiconductor stocks having surged significantly on expectations of increased AI-related spending. 

The divergence between software and semiconductor stocks, which widened significantly in August, continued into September. The iShares Expanded Tech-Software Sector ETF (IGV) had surged over 16% in August, while the semiconductor ETF finished the month with only a 1% gain after giving back most of its mid-month rally. The rollover in chip stocks and other AI infrastructure plays, including companies supplying electrical equipment, power infrastructure, and networking gear, has raised questions about the sustainability of the AI-driven rally that has dominated markets this year. 

Novartis Shares Surge 7% on Promising Multiple Sclerosis Drug Trial Results 

Novartis (NVS) shares rose 7% in early trading after the Swiss pharmaceutical company announced encouraging results from a Phase 3 clinical trial of its remibrutinib multiple sclerosis drug. The company said the drug helped lower relapse rates and reduced adverse effects at a higher rate than a rival treatment, meeting its trial goals. 

Novartis Chief Medical Officer Shreeram Aradhye said that despite advances in treatment, an unmet need remains for oral therapies that can deliver robust relapse prevention while maintaining a favourable safety profile. The company plans to present the trial data at an MS conference in Toronto in October, with analysts expecting more detailed comparisons with peer Roche’s drug fenebrutinib. 

The positive readout outweighed a setback in the company’s pursuit to treat patients with autoimmune disease using cell therapy. Novartis confirmed earlier media reports that it had temporarily stopped enrolling and treating patients with its drug rapcabtagene autoleucel, or rap-cel, after learning of three fatal cases of severe immune response. The cell therapy, known as a CAR-T treatment, has excited pharmaceutical companies about the prospect of modifying a patient’s own immune cells to help find and destroy harmful cells in the body. 

With Tuesday’s gains, Novartis shares are up 18% since the start of the year, though they remain approximately 5% off their highs reached in February. The company’s progress in developing new treatments for multiple sclerosis and other conditions reflects the broader pharmaceutical industry’s focus on innovative therapies to address unmet medical needs. 

Dell and Palo Alto Networks Shares Decline Ahead of Quarterly Earnings Reports 

Dell Technologies (DELL) shares declined 2.69% and Palo Alto Networks (PANW) fell 3.64% ahead of their quarterly results scheduled for release after markets close on Tuesday. The declines reflect investor caution ahead of the reports, with both companies seen as bellwethers for corporate spending on technology and cloud services. 

The gush of second-quarter earnings reports may have slowed to a trickle, but these releases will provide valuable insights into how large corporations are allocating their technology budgets amid an uncertain economic environment. Broadcom’s (AVGO) earnings report, scheduled for Wednesday, will be closely watched for indications of demand for networking and infrastructure chips, particularly in the context of AI-related spending. 

Snowflake (SNOW) shares also came under pressure ahead of its quarterly results on Wednesday, with options markets pricing in a potential swing of up to 10.5% following the report. Analysts have grown more bullish heading into the report, with Oppenheimer, Bank of America, Deutsche Bank, and UBS all recently lifting their price targets. Bank of America analysts expressed higher conviction that demand for Snowflake is strong and that the company will continue monetising its AI products. 

Tesla Stock Extends Rally on Cybercab Launch Speculation Ahead of Thursday Event 

Tesla (TSLA) shares had rallied 5.5% on Monday, extending a strong performance that saw the stock gain 18% in August. However, the stock declined 2.67% on Tuesday, giving back some of its recent gains as investors took profits ahead of the company’s expected cybercab launch on Thursday in Austin, Texas. 

The two-seater vehicle, designed without a steering wheel or pedals in a show of commitment to a fully autonomous future, has been spotted on the road in some cities during testing in recent months, though often with steering wheels and supervising drivers. The company hasn’t offered many details about what to expect from Thursday’s invitation-only event, giving way to speculation about whether it could be just a limited launch or a broader public rollout. 

Despite the recent rally, Tesla shares remain down more than 25% from the 52-week high hit last December, reflecting the challenges the company has faced this year. The cybercab launch could represent a much-needed win for the company as it seeks to demonstrate progress on its autonomous driving technology and regain investor confidence. 

Labour Market Data Takes Centre Stage as August Jobs Report Looms 

Attention now turns to US labour market data, with the Labor Department’s Job Openings and Labour Turnover Survey (JOLTS) due later on Tuesday and the more closely watched nonfarm payrolls report scheduled for Friday. Investors will assess the figures for signs of labour market resilience and clues about the Federal Reserve’s policy outlook. 

The central bank’s focus remains on inflation, making incoming economic data critical for rate expectations. A payrolls report broadly in line with forecasts could reinforce the view that the timing of any future policy shift will depend more on the path of price pressures than on the pace of job growth. Data releases from S&P Global and the Institute for Supply Management will also give insight into manufacturing activity. 

The economic data comes amid a historically weak seasonal backdrop for US equities. Since 1926, the S&P 500 has recorded an average loss of 0.7% in September, making it the weakest month for stocks and the only month with a negative average return, according to Fisher Investments data cited from Finaeon. Strategists advise investors not to rely on seasonal patterns alone when making investment decisions, emphasising the importance of underlying economic conditions rather than attempting to time short-term seasonal volatility. 

September trading opened amid sharp volatility as US stocks fell across major indices, pressured by rising bond yields and oil prices amid renewed Middle East tensions. The 10-year Treasury yield reached 4.78%, while WTI crude hit $88.30. Technology stocks declined, while energy shares outperformed. Markets await Friday’s jobs report. 

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