Wall Street slides after weak data kills early rally

(Reuters) -The S&P 500 fell more than 2% and the Nasdaq more than 3% at one point late on Thursday, reversing early gains and closing the first session of August sharply lower after data spurred concerns the economy may be slowing too fast as the Federal Reserve maintains a restrictive monetary policy.

Equities were initially buoyed by gains in Meta Platforms after its quarterly results topped expectations and the Facebook parent issued an upbeat outlook for the third quarter.Its shares were last up 4.37% and $495.55. But concerns overAI-related earnings and the outlook for megacap stocks has hitthe market during several recent sessions.

Stocks turned lower after data showed a measure ofmanufacturing activity from the Institute for Supply Management(ISM) dropped to an eight-month low in July at 46.8, signifyingcontraction.

The Dow Jones Industrial Average fell 494.82 points, or 1.21%, to 40,347.97, the S&P 500 lost 75.62 points, or 1.37%, to 5,446.68 and the Nasdaq Composite lost 405.25 points, or 2.30%, to 17,194.15.

COMMENTS:

TIM MURRAY, CAPITAL MARKETS STRATEGIST IN THE MULTI-ASSET DIVISION, T. ROWE PRICE, BALTIMORE

"We saw manufacturing fall yet again … Probably the weakness in the labor market is less concerning … but the manufacturing weakness is something that is somewhat concerning.

"In general … there's reasons to think: are we finally getting to the point where the Fed raising rates and keeping rates high for so long is finally starting to have an effect on the economy?"

ART HOGAN, CHIEF MARKET STRATEGIST, B. RILEY WEALTH

“The narrative shift from yesterday to today was remarkably rapid. We went from celebrating the fact that the Fed is finally going to cut rates in September to being concerned that they're cutting rates because the economy is slowing down rapidly.“

STEVE SOSNICK, MARKET STRATEGIST, INTERACTIVE BROKERS,GREENWICH, CT

“I didn’t get a lot of calls yesterday when stocks wereup by the same amount, because the general perception is thatstocks go up. When they go up, you don’t need much of a reason.You need a reason when they go down. Yesterday was sociallyacceptable volatility. The magnitude of both days’ moves, oneafter the other, is what is alarming people. I was stunned atthe ferocity of the move yesterday. For better worse, that’sjust the unwinding of the move.”

“Even though the jobless claims and ISM data weren’tatrociously terrible, they remind people that if you’ve alreadypriced in three rate cuts and the economy is cracking, how muchmore runway do you have to cut? That’s why you’re seeing bondsrip higher.”

“Without a good economy, these economically sensitivesmall stocks just won’t do anything, even with rate cuts. Forthem, it’s not just the Fed funds rate that is important; it’smore about whether or not they can access the high-yield debtmarket. And if the economy struggles, that won’t happen.”

LOU BASENESE, PRESIDENT AND CHIEF MARKET STRATEGIST, MDBCAPITAL, NEW YORK (via text)

“Markets turned almost immediately on the second weakISM manufacturing reading in a row. Why? Because it raises agenuine fear that the Fed is behind on cutting rates. Fewinvestors have confidence in the Fed sticking the proverbialsoft landing and now the data is starting to support thoseconcerns. Jobs report tomorrow will be key to stopping thebleeding or making it worse. A weaker than expected jobs reportwould be another data point in a growing set the economy isrolling over faster than the Fed can combat it with a rate cut.”

CAROL SCHLEIF, CHIEF INVESTMENT OFFICER, BMO FAMILY OFFICE IN MINNEAPOLIS, MINNESOTA

"You've two big tech companies reporting today. We'vethe Fed out of the way yesterday so people are really focused onfundamentals. People were buoyed a little by the Fed commentaryyesterday. Today they're moving to the sidelines andrepositioning not to have too overweight a position in anythingahead of the big earnings reports."

"And You're seeing at the margin some potential fear ofescalation in the Middle East."

BILL STRAZZULLO, CHIEF MARKET STRATEGIST, BELL CURVE TRADING,BOSTON

“I think what you’re seeing now, and you’d probably see itfor the next month or two, is some kind of consolidation andsideways price action. I still think the bigger picture bulltrend is intact. I still think the S&P is going to end upsomewhere around 5900 to 6,000. I think the NASDAQ 100 is goingto be up somewhere around 22,000. I think the Dow is going toend up somewhere around 45,000 to 46,000 before it's over.

"But we're in a period now where the market is kind ofdigesting its gains sideways, back and forth. We're notsurprised at all with the selling. I just think we're going tobe in a two way market for the first time for the next month ortwo. Tomorrow we’ve got non-farm. So we'll see what happenstomorrow, but I’m not surprised by the price action.”

SPENCER HAKIMIAN, CEO, TOLOU CAPITAL MANAGEMENT, NEW YORK

"We believe the selloff in risk assets today is related tocross asset deleveraging. Further, we believe growth fears areinconsistent with an accommodative fiscal dropout, real wagegrowth, and strong 2025 capex guidance from technologycompanies."

QUINCY KROSBY, CHIEF GLOBAL STRATEGIST, LPL FINANCIAL,CHARLOTTE, NORTH CAROLINA (emailed note)

"Welcome to August. With a package of data released today suggesting the economy is cooling at a faster - and perhaps too fast - pace, the drop in the ten-year Treasury yield to below 4% reflects a looming economic growth scare and further questions whether the Fed is correct in waiting until September to begin its easing cycle.

"The market remains hyper mindful that the Fed waited toolong to begin raising interest rates as it now wonders if theFed is too late in transitioning monetary policy.

"The almost guarantee that the September 18 Fed meeting ispoised for an initial rate cut is not enough to placate a marketthat clearly doesn't want to see yields come down because of amaterial economic slowdown, but also wants the Fed to provide abulwark in the event a cooling morphs into something moreserious.

"Traders and investors alike remember clearly how'transitory' masked inflation becoming embedded throughout theeconomic landscape and consumer psychology.

"If tomorrow's payroll report sees the unemployment raterising despite an increase in the participation rate, the Fed isgoing to have alot of explaining to do as officials hit theairwaves with their opinions.

"Today's selloff isn't about earnings, it's about whetherthe Fed sees what the data is saying."

(Compiled by the Global Finance & Markets Breaking News team) ((alden. [email protected]; 646-281-6041;)) nL1N3JO1AH

(Compiled by the Global Finance & Markets Breaking News team; alden. [email protected]; 646-281-6041)