U.S. Stock Market Dips as September Slump Begins: Key Factors at Play

U.S. stocks fell sharply on Tuesday, kicking off the historically poor-performing month of September. Weak manufacturing data and concerns about Federal Reserve interest rate cuts contributed to market declines, particularly in the technology, energy, and industrial sectors. Major indexes such as the S&P 500, Nasdaq, and Dow experienced significant drops.

U.S. stocks experienced a notable slump on Tuesday, marking the onset of September, a month historically riddled with market downturns. The decline comes ahead of economic data that could impact the Federal Reserve's decision on future interest rate cuts.

The S&P 500, Nasdaq, and Dow all registered their largest daily declines since early August, with investor sentiment waning as the Institute for Supply Management reported subdued U.S. manufacturing activity. Despite a slight improvement in August, manufacturing remains weak.

Additional labor market reports are eagerly awaited, especially the non-farm payroll data due Friday. The current odds of a 25-basis point rate cut are at 63%, according to CME Group's FedWatch Tool, while a larger 50 bps cut is at 37%. Tech giants like Nvidia and Microsoft fell, exacerbating the downturn.

(With inputs from agencies.)