US stock futures in turmoil: Dow, S&P 500, Nasdaq drop as Trump tariffs ruled illegal, Treasury yields climb, Nvidia and AI stocks slide
U.S. equity futures opened weaker on Tuesday, September 2, as traders returned from the Labor Day break to a cocktail of rising bond yields, tariff drama, and renewed doubts over AI chip demand.
- Dow futures fell 0.6% below fair value.
- S&P 500 futures slipped 0.7%.
- Nasdaq 100 futures dropped 1%.
The pullback comes just days after the S&P 500 touched fresh highs on Thursday, only to reverse as Nvidia and other AI-linked stocks sold off sharply into the weekend.
Trump Tariffs Declared Illegal — But Still in Force
Late Friday, a federal appeals court ruled that most of President Donald Trump’s tariffs were illegal. While the ruling was expected, it introduces a messy legal battle that could eventually land at the Supreme Court.
For now, the tariffs remain in effect. That means U.S. businesses still face the same import costs, but the government may ultimately have to reimburse tens of billions of dollars.
Analysts warn that the Treasury could need to issue more debt to cover refunds, a factor contributing to the uptick in yields.
- 10-year Treasury yield: 4.29%
- 30-year yield: near 5%
Higher yields tend to pressure equities, particularly growth and tech names that rely on future cash flows.
AI Stocks Under Fire Again
The story of the day is once again AI chipmakers. Nvidia’s stock slid 3.4% on Friday and extended losses early Tuesday. Reports that Alibaba is developing its own AI chip to replace Nvidia’s China-bound products hit sentiment hard.
Other chipmakers were dragged lower:
- AMD: down nearly 3% Friday, weaker again premarket.
- Taiwan Semiconductor (TSMC): slipped below its 50-day moving average.
- Broadcom: sank 3.65% Friday, drifting lower this morning.
- Marvell Technology: collapsed nearly 19% on disappointing AI guidance.
The concern isn’t global AI spending — unlike January’s DeepSeek panic — but specifically Nvidia’s China exposure.
With Beijing pushing local firms to source domestic chips, U.S. semiconductor giants face a tougher road in a critical market.
Sector Winners: Gold, Staples, Healthcare
Not every corner of the market is red. With gold hitting record highs, miners rallied strongly:
- Harmony Gold surged 6.2%
- Kinross gained 2.7%
- Newmont rose 1.5%
In defensive plays, PepsiCo jumped 4.6% after Elliott Management revealed a $4 billion stake, setting the stage for strategic changes.
Biogen climbed about 1% on FDA approval for a weekly Alzheimer’s drug, and Corning advanced 1.2% following a UBS upgrade.
These moves underscore how investors are rotating into safer assets and essential goods while trimming exposure to high-beta tech.
Tesla and EV Rivals
Tesla remains volatile. Shares briefly broke out last week but closed down 1.8% as Friday’s AI-driven selloff caught up with Elon Musk’s company. Early Tuesday, Tesla traded 1% lower near its 200-day line.
In China, Tesla cut the price of its Model 3 LR RWD, while launching the longer-wheelbase Model Y L. Local rivals reacted mixed: Nio and XPeng reported record August deliveries, while Li Auto and BYD struggled to keep pace.
Airline Shock: Spirit’s Bankruptcy
Adding to the day’s headlines, Spirit Airlines filed for Chapter 11 bankruptcy for the second time in a year. The news lifted rivals, particularly Frontier Airlines, as capacity shifts could strengthen pricing power in the low-cost segment.
Last Week’s Rally vs. This Week’s Risk-Off
Despite today’s cautious tone, last week’s market wasn’t weak overall:
- Dow: −0.2%
- S&P 500: −0.1%
- Nasdaq: −0.2%
- Russell 2000: +0.2%
ETF flows showed mixed risk appetite. Growth-oriented funds like the Innovator IBD 50 ETF gained 1.7%, while semiconductor-heavy SMH slid 1.1%. Energy and metals ETFs gained strongly, echoing commodity price strength.
What Investors Should Watch Next
The key catalyst this week is Friday’s August nonfarm payrolls report. Markets are pricing in a 90% chance of a 25-basis-point Fed rate cut later in September, but that assumption could shift quickly if jobs data surprise on the upside.
For investors, today’s message is clear:
- AI names remain under scrutiny — China headlines can move Nvidia and its peers fast.
- Defensive sectors are showing relative strength.
- Rising yields are a headwind and must be monitored closely.
- Tariff litigation is a long-term risk but less immediate for markets.
Until jobs data hit, expect volatility, especially in tech. Traders may need to trim exposure to recent buys and stay nimble around key support levels.