U.S. stock futures declined on Wednesday following a rough start to September, with the S&P 500 experiencing its worst day since early August. The downturn on Wall Street was exacerbated by pressure on chip stocks, driven by two reports indicating a slowdown in U.S. manufacturing production. Investors are now turning their attention to upcoming economic data releases, including the U.S. trade deficit, job openings and labor turnover (JOLTS) survey, and factory orders, to gauge the health of the economy.

European stocks faced a significant downturn in morning trading on Wednesday, mirroring the losses seen on Wall Street and in Asia-Pacific markets. The pan-European Stoxx 600 index fell by 0.93% as of 11:08 a.m. in London, with all sectors experiencing declines. Technology stocks were hit the hardest, dropping by 2.68%, while travel stocks also saw a notable decrease of 1.1%.

The Nikkei experienced its worst day since the early August sell-off, with significant declines in Asian markets led by the Taiex. The tech sector was particularly hard hit, as major chip manufacturers Samsung Electronics and SK Hynix, both key suppliers to Nvidia, saw their shares plummet by 3.45% and 8.02%, respectively. Despite the widespread downturn, mainland Chinese and Hong Kong indexes managed to limit their losses, faring better than other markets in the region.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday before the bell include DKS, DLTR, CRMT, CIEN, CNM, HRL, REVG, & CURV. After the bell include AVAV, AI, CASY, CHPT, CPRT, BASE, CRDO, DSGX, HPE, PHR, CXM, VRNT, & YEXT.

News & Technicals’

Global semiconductor and related stocks experienced a significant decline on Wednesday, triggered by a sharp drop in Nvidia’s share price in the U.S. the previous night. On Tuesday, Nvidia saw an unprecedented $279 billion wiped off its market value, marking the largest one-day market capitalization loss for a U.S. stock in history. The downward trend continued in post-market trading, with Nvidia shares falling an additional 2% following reports from Bloomberg that the company had received a subpoena from the Department of Justice as part of an antitrust investigation.

DraftKings and White Hat Gaming were fined a combined $22,500 by the state of Connecticut for operating an online slot machine game, Deal or No Deal Banker’s Bonanza, which failed to pay out any winnings on over 20,600 spins during a week in August 2023. The game was advertised to return nearly 95 cents for every dollar wagered. However, from August 15 to August 21, 2023, 522 players in Connecticut wagered almost $24,000 on the game across 20,659 spins without receiving any payouts, as reported by Connecticut’s Department of Consumer Protection.

SpaceX’s satellite internet service, Starlink, announced it will comply with court orders to block the social network X in Brazil. Both companies are owned by Elon Musk. Brazil’s supreme court mandated the suspension of X due to non-compliance with federal regulations on content moderation and the appointment of a legal representative in the country. Musk has been vocally critical of Brazil’s administration for months, even threatening “reciprocal seizure of government assets” in response to the court’s actions against his businesses.

Management at German automotive giant Volkswagen is preparing for a contentious townhall meeting with workers on Wednesday, where senior business leaders will outline potential job cuts. On Monday, Volkswagen warned that it could no longer rule out the possibility of closing plants in Germany. This announcement has drawn sharp criticism from Volkswagen’s work council and the major German industrial union IG Metall, both of which have vowed to oppose the proposed cuts.

Although we had a rough start to September keep in mind one day does not make a trend.  The follow-though of the price action will be critical today.  If the bears continue to gain ground, we fear could spike price adding to the volatility.  However, if the bulls can defend support levels and 50 day moving average levels it will ease the minds of traders.  Keep in mind corporate buybacks could ride to the rescue of the market at least for the short term. 

Trade Wisely,

Doug