Stocks slump in August kick-off as data reignites slowdown worries
US manufacturing gauge drops to eight-month low
Arm Holdings down after tepid Q2 revenue forecast
Eli Lilly up as weight-loss drug cut heart failure risk in trial
Updated at 4:00 p.m. ET/2000 GMT
By Chuck Mikolajczak
NEW YORK, Aug 1 (Reuters) - U.S. stocks kicked off August sharply lower after a round of economic data on Thursday spurred concerns the economy may be slowing faster than anticipated while the Federal Reserve maintains a restrictive monetary policy.
Equities initially opened higher, buoyed in part by gains in Meta PlatformsMETA.O after its quarterly resultstopped expectations and the Facebook parent issued an upbeat outlook for the third quarter. Its shares closed higher as the biggest boost to the S&P 500.
Early gains, however, evaporated after data showed a measure of manufacturing activity from the Institute for Supply Management (ISM) dropped to an eight-month low in July at 46.8, signifying contraction.
"What you’re seeing now, and you will probably see it for the next month or two, is some kind of consolidation and sideways price action," said Bill Strazzullo, chief market strategist at Bell Curve Trading in Boston.
"The bigger picture bull trend is intact ... But we're in a period now where the market is kind of digesting its gains sideways, back and forth."
According to preliminary data, the S&P 500 .SPX lost 76.10 points, or 1.38%, to end at 5,446.20 points, while the Nasdaq Composite .IXIC lost 405.25 points to 17,194.15. The Dow Jones Industrial Average .DJI fell 508.81 points, or 1.25%, to 40,333.98.
August is typically one of the weakest months of the year for stocks.
Other data showed the number of Americans filing new applications for unemployment benefits increased to an 11-month high last week, suggesting some softening in the labor market, although seasonal factors also played a role.
Investors will eye the government payrolls report on Friday for any signs of further weakness in the labor market.
Both the S&P 500 and Nasdaq registered their biggest daily percentage gains since February in the prior session, boosted by a rally in chip shares after the Fed kept rates steady, as expected.
Defensive sectors such as utilities.SPLRCU and real estate.SPLRCR led gains, as geopolitical concerns over rising tensions in the Middle Eastboosted the dollar and pulled Treasuryyields lower.
Declines in megacap names such as AppleAAPL.O and AmazonAMZN.O ahead of their quarterly results due after the closing bell weighed heavily on the tech .SPLRCT and consumer discretionary .SPLRCD indexes, which were among the worst performing of the 11 major S&P sectors.
Of the 342 companies in the S&P 500 that have reported earnings through Thursday morning, 79.2% have topped analyst expectations, according to LSEG data, slightly above the 79% beat rate over the past four quarters. The estimated earnings growth rate for the quarter is 13.3%, up from 10.6% on July 1.
The small-cap Russell 2000 .RUT slumped more than 3% and for its biggest daily percentage drop since Feb. 13. Small caps have been volatile recently as investors rotate between cheaper names and more expensive stocks.
Nvidia NVDA.O slumped in a broader chip stocks selloff sparked byArm Holdings' ARM.O conservative revenue forecast and Qualcomm QCOM.O flagging a revenue hit from the impact of trade curbs, dragging those stocks lower.
Moderna MRNA.O plungedafter cutting its2024 sales forecast for COVID-19 and respiratory syncytial virus vaccines by up to 25%.
Eli Lilly LLY.Nrose aftertrial results showed weight-loss drug Zepbound reduces the risk of hospitalization, death and other outcomes for obese adults with a common type of heart failure.
US unemployment claims https://reut.rs/3yqdYFJ
Q2 earnings growth on track for most S&P 500 sectors Q2 earnings growth on track for most S&P 500 sectors https://reut.rs/3Sv5ZOz
Reporting by Chuck Mikolajczak, additional reporting by Chibuike Oguh; Editing by Marguerita Choy
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