Stocks suffered their worst day since the August 5 market meltdown, with the S&P 500 dropping over 2% amid renewed concerns about growth and monetary policy. Tech stocks were hit the hardest, led by Nvidia Corp., which spurred a broader decline in chipmakers. The market reaction mirrored August’s turbulence, with the yen rising, a key manufacturing index missing forecasts, and oil prices plummeting on fears of weak global demand. Wall Street's "fear gauge," the VIX, surged, while Treasury yields fell as traders anticipated a significant Federal Reserve rate cut later this year.

The S&P 500 and Nasdaq 100 experienced their worst starts to September since 2015 and 2002, respectively. With inflation expectations stable, market focus has shifted to the health of the economy, as signs of weakness could accelerate policy easing. However, while rate cuts typically support equities, the current situation is different, with the Fed potentially acting to avert a recession. Traders are now expecting a steep reduction in rates over the next year, creating uncertainty ahead of Friday’s payrolls data, which could influence the Fed's next move.