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The worst day on the stock market since the crash of August 5

Top line

Wall Street experienced a cold chill on Thursday ahead of a major speech by Federal Reserve Chairman Jerome Powell, and major indices recorded their worst days in weeks.

Key data

The blue-chip Dow Jones Industrial Average index fell 0.4 percent or 164 points, the benchmark S&P 500 lost 0.9 percent and the technology-heavy Nasdaq Composite lost 1.7 percent.

For the S&P and Nasdaq, these are the biggest daily losses since August 5, when both indices fell 3% or more, marking their worst day since 2022. For the Dow, Thursday was the worst day since August 7.

Among the biggest losers on Thursday were sectors that are more sensitive to higher interest rates. The S&P stocks for information technology and consumer discretionary goods each lost around two percent.

The biggest individual losers included stocks such as Intel and Tesla, whose shares each fell 6%, and Nvidia, whose shares fell 4%.

Bond yields rose on Thursday as investors fled to safety, with 2- and 10-year U.S. Treasury yields each rising about 9 basis points.

Important background

There was no single trigger for the losses – rather, they were the result of traders moving away from riskier stocks ahead of Powell's appearance in Jackson Hole, Wyoming, on Friday. His speech could reveal a less dovish Fed than investors currently expect, who are looking to boost corporate profit margins and thus stock valuations with much lower interest rates. Thursday's losses came after stocks opened higher as indexes tested last month's all-time highs. The S&P came within 0.5% of its record shortly after the market opened.

Contra

There is little evidence that Thursday's negative price action was more than a dip, which often occurs when indexes approach record highs as stocks continue to rebound strongly from their August doldrums. The S&P is up nearly 9% since its Aug. 5 low. Thursday was also the S&P's second-weakest day of 2024 by trading volume, according to Yahoo Finance data, suggesting there was likely greater price sensitivity in the dog days of summer. “We have a very thinly traded market today looking toward Labor Day with some trepidation,” Sanders Morris Chairman George Ball told CNBC.

More information

ForbesFed Chairman Powell prepares important speech in Jackson Hole: What to look out forFrom Derek Saul

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