Markets Recover from Tuesday’s Slump, But Stormy September May Be Ahead

Written by Lucas Shum

September 4, 2024

Stocks are beginning to recover after a slight dip on Tuesday, which saw the S&P 500 and Nasdaq Composite each slip about 0.3%. The Dow Jones Industrial Average also fell, losing 55 points, or 0.15%. Despite the initial losses, the market showed signs of resilience by the end of the day.

One of the more notable recoveries came from Nvidia, which rebounded after a 3% loss earlier in the session. The chipmaker had faced pressure following a Bloomberg report that the U.S. Justice Department had issued subpoenas related to its business practices. However, Nvidia managed to regain ground as buyers stepped in, reflecting the market’s mixed sentiments in response to regulatory scrutiny.

The broader recovery was fueled by a shift in the Treasury market’s yield curve, which returned to a more normal state. The curve had been inverted, with the 10-year Treasury yield falling below the 2-year yield—a phenomenon often seen as a warning of a potential recession. This inversion had caused anxiety among investors, leading to Tuesday’s dip. However, by Wednesday, the 10-year yield had returned to match the 2-year yield and moved slightly higher, easing some fears about an imminent economic downturn.

What Lies Ahead for the Market?

While the recovery provides a short-term boost, traders are preparing for potential volatility in September, which is historically a challenging month for equities. Concerns about inflation, interest rates, and broader economic uncertainty continue to weigh on investor sentiment. Many market participants are bracing for a possible pullback of 5% or more in the coming weeks, a reflection of the mixed economic signals and caution about the future.

For now, the market’s slow recovery offers a glimmer of hope, but investors remain vigilant. With key economic data and corporate earnings reports on the horizon, the path forward is likely to be marked by uncertainty and potential turbulence. As always, navigating these markets will require a careful balance of caution and readiness to seize opportunities as they arise.

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