Stocks posted their worst day since the Aug. 5 market meltdown, with the S&P 500 falling more than 2%, as growth and monetary anxieties combined to torch risky assets much as they did a month earlier.

Just as in the August episode, tech got hit the hardest, with Nvidia Corp. driving a plunge in chipmakers. And the parallels don’t stop there. The yen jumped, a closely watched manufacturing gauge again missed forecasts, and oil plummeted on concern about tepid global demand. Wall Street’s “fear gauge” – the VIX – soared. Treasury yields tumbled, with traders keeping their bets on an unusually large half-point Federal Reserve rate cut this year.

The S&P 500 and the Nasdaq 100 saw their worst starts to a September since 2015 and 2002, respectively. With inflation expectations anchored, attention has shifted to the health of the economy as signs of weakness could speed up policy easing. While rate cuts tend to bode well for equities, that’s not usually the case when the Fed is rushing to prevent a recession.

Traders are anticipating the Fed will reduce rates by more than two full percentage points over the next 12 months — the steepest drop outside of a downturn since the 1980s. The trepidation after the latest rise in unemployment will leave traders “on edge” until Friday’s payrolls data, said Ian Lyngen and Vail Hartman at BMO Capital Markets.

“This week’s jobs report, while not the sole determinant, will likely be a key factor in the Fed’s decision between a 25 or 50 basis-point cut,” said Jason Pride and Michael Reynolds at Glenmede. “Even modest signals in this week’s jobs report could be a key decision point as to whether the Fed takes a more cautious or aggressive approach.”

The S&P 500 dropped to around 5,530. The Nasdaq 100 and the Russell 2000 each lost over 3%. The Dow Jones Industrial Average fell 1.5%. The $22 billion VanEck Semiconductor ETF saw its biggest plunge since March 2020. Nvidia tumbled 9.5%, erasing $279 billion in a record one-day wipeout for a US stock. The US Justice Department sent subpoenas to Nvidia and other companies as it seeks evidence that the chipmaker violated antitrust laws.

US 10-year yields fell seven basis points to 3.84%. A record number of blue-chip firms tapped the corporate-bond market, taking advantage of cheaper borrowing. The yen climbed as Bank of Japan’s Kazuo Ueda reiterated the central bank will continue to raise rates if the economy and prices perform as expected.

The Morgan Stanley strategist who foresaw last month’s market correction says firms that have lagged the rally in US stocks could get a boost if Friday’s jobs data provide evidence of a resilient economy. A stronger-than-expected payrolls number would likely give investors “greater confidence that growth risks have subsided,” Michael Wilson wrote.

The equity-market rally may stall near record highs even if the Fed starts a highly anticipated rate-cutting cycle, JPMorgan Chase & Co. strategists said earlier this week. The team led by Mislav Matejka noted that any policy easing would be in response to slowing growth, making it a “reactive” reduction.”

“We are not out of the woods yet,” Matejka wrote in a note, reiterating his preference for defensive sectors against the backdrop of a pullback in bond yields. “Sentiment and positioning indicators look far from attractive, political and geopolitical uncertainty is elevated, and seasonals are more challenging again in September.”

September has been the biggest percentage loser for the S&P 500 since 1950, according to the Stock Trader’s Almanac. A contrarian sentiment gauge from Bank of America Corp. rose to its highest level in nearly two and a half years last month — creeping closer to a “sell” signal for US stocks.

To Callie Cox at Ritholtz Wealth Management, aside from the macro picture, there’s also the fact that we’re entering what’s often a “miserable time” of the year for equities.

“While history isn’t gospel, it’s not crazy to think that this September could be especially volatile,” Cox noted. “But this isn’t the conclusion to draw from decades of seasonal market data. Instead, your attention should be on why this is a “buyable dip, because there are a lot of reasons to be optimistic here.”

Among those, she cited: earnings growth, the Fed about to start easing policy against the backdrop of controlled inflation and the fact that investors are sitting on a massive pile of cash “that could make its way back into stocks.”

“A key lesson from the last few weeks is that big-tech stocks have not proven defensive during the recent market pullbacks,” said Philip Straehl at Morningstar Wealth. “While there is little evidence of a slowdown in AI spending, valuations have set a high bar for incoming corporate and macro data.”

Rich Ross at Evercore says the S&P 500 has had at least a 5% drawdown from the August/September highs in nine of the last 10 years.

“This year should be no different after the late August squeeze into resistance at an all-time high,” Ross noted. “The S&P has a strong downside bias buttressed only by a bent towards ‘low volatility’ defensives and financials — which benefit from lower rates and steeper curves.”

As investors navigate through the historically weak September, Anthony Saglimbene at Ameriprise remarked the October-December period is the S&P 500’s strongest three-month stretch.

“In our view, investors should remain focused on using volatility to their advantage,” Saglimbene said. “Importantly, lean on time-tested dollar-cost averaging strategies and portfolio diversification to weather a potentially bumpier push into year end.”

Marking the start of a busy week for economic data, a report showed US manufacturing activity shrank in August for a fifth month.

While above the modest 114,000 gain in July, average payrolls growth over the most recent three months would ease to a little more than 150,000 — the smallest since the start of 2021. The jobless rate probably edged down in August, to 4.2% from 4.3%.

While the Fed is finally coming around to cutting rates, it does not feel like stringing out a bunch of 25 basis-point rate cuts will do the job, said Neil Dutta at Renaissance Macro Research. Under that scenario, it will take a long time to return the funds rate to neutral and in the process, you’ll keep policy restrictive, keeping open downside risks to growth.

“That muddling through scenario will probably risk further increases in the unemployment rate. So, if they aren’t going 50 in September, they are going to need to go 50 at some point later this year,” he concluded.

Corporate Highlights:

Boeing Co. slumped as Wells Fargo & Co. lowered the planemaker to a sell-equivalent recommendation, saying it’s hard to see any upside in the shares.

Vice President Kamala Harris joined President Joe Biden in declaring that United States Steel Corp. should remain domestically owned and operated, the latest headwind to the proposed sale of the company to Japan-based Nippon Steel Corp.

Deutsche Bank AG cut the recommendation on JPMorgan Chase & Co. to hold from buy, while upgrading Bank of America Corp. and Wells Fargo & Co. on changing preferences within the banks sector.

The German government plans to cut its stake in Commerzbank AG as it seizes on a recent share rally to initiate an exit from the lender it rescued over a decade ago.

Illumina Inc.’s blocked $7 billion takeover of cancer-detection provider Grail Inc. should never have been probed by the European Union, according to a top court ruling that undermines the EU’s attempt to vet more global deals.

Cathay Pacific Airways Ltd.’s inspection of its Airbus SE A350 fleet is focused on deformed or degraded fuel lines in the engines of the widebody aircraft, after the discovery of the issue caused multiple flight cancellations as engineers switch out parts.