By Chibuike Oguh

NEW YORK (Reuters) -U.S. stocks slumped on Tuesday, at the start of one of the market’s historically worst months, ahead of data likely to influence how much the Federal Reserve will lower interest rates.

The benchmark S&P 500 index, Nasdaq Composite Index and the Dow Jones Industrial Average recorded their biggest daily percentage declines since early August. Nine out of 11 S&P 500 sectors fell, led by declines in technology, energy, communication services and materials.

Market sentiment weakened as Institute for Supply Management data on Tuesday showed U.S. manufacturing remained subdued despite a modest improvement in August from an eight-month low in July.

September is widely regarded as one of the worst months for stock market performance based on data stretching back to the 1950s, said Jason Browne, president at Alexis Investment Partners in Montgomery, Texas.

“We had a weak ISM report come out this morning, but we do believe seasonality is a big factor here especially when you’ve had such a solid performance for the year until the end of last month,” Browne said.

“Everybody is reporting about how September is such a horrible month and that tends to feed on itself.”

The so-called Magnificent Seven megacap technology stocks, which have led this year’s rally, slumped. Nvidia dropped nearly 10%, shedding a record $279 billion from its market capitalization, which ended at $2.65 trillion. That is the biggest ever single-day decline in market value for a U.S. company.

Alphabet fell 3.6%, Apple lost 2.7% and Microsoft shed 1.8%. The Philadelphia SE Semiconductor index fell 7.8%.

The Dow fell 626.15 points, or 1.51%, to 40,936.93, the S&P 500 dropped 119.47 points, or 2.12%, to 5,528.93 and the Nasdaq Composite slid 577.33 points, or 3.26%, to 17,136.30.

The CBOE Volatility Index, Wall Street’s fear gauge that measures market expectations of stock market swings, jumped 33.2% to 20.72, the biggest daily percentage gain and highest close since early August.

Traders are awaiting several labor market reports ahead of Friday’s non-farm payrolls data for August.

The Fed’s meeting on Sept. 17-18 will be closely observed following Chair Jerome Powell’s recent support for easing monetary policy.

Odds of a 25-basis point interest rate cut are at 63%, the CME Group’s FedWatch Tool showed, while those for a bigger 50 bps reduction are at 37%.

Tesla fell 1.6% after Reuters reported that the electric vehicle maker plans to produce a six-seat variant of its Model Y car in China from late 2025.

Boeing dropped 7.3% after Wells Fargo downgraded the aircraft manufacturer’s shares to “underweight” from “equal weight.”

Declining issues outnumbered advancers by a 2.52-to-1 ratio on the NYSE, which had 297 new highs and 83 new lows. On the Nasdaq, 946 stocks rose and 3,315 fell as declining issues outnumbered advancers by 3.5 to 1.

Volume across U.S. exchanges totaled 12.14 billion shares, up from nearly 11 billion for the 20-day moving average.

(Reporting by Chibuike Oguh; Additional reporting by Johann M Cherian and Purvi Agarwal in Bengaluru; Editing by Richard Chang)

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