Investors were met with a sharp decline in the stock market on Tuesday as September trading began on a challenging note. With the historically difficult month for markets underway, tech stocks, including AI darling Nvidia (NVDA) and prominent chip names, suffered significant losses. The Dow Jones Industrial Average (DJI) tumbled by 1.5%, shedding over 600 points, while the S&P 500 (GSPC) dropped 2.1% and the tech-heavy Nasdaq Composite (IXIC) retreated by 3.3%.

As Wall Street braces for a potentially turbulent September after a rollercoaster August, investors are closely watching crucial data on the economy and labor market, highlighted by the anticipated release of the monthly jobs report later this week. The outcome of this report could play a crucial role in determining the extent of interest rate cuts by the Federal Reserve at its upcoming meeting.

Nvidia, a leading AI chipmaker, saw its stock fall nearly 10% amid ongoing investor withdrawals following lackluster earnings and lingering uncertainties surrounding the future of the AI trade. Other chip stocks, including Broadcom (AVGO), Qualcomm (QCOM), and Taiwan Semiconductor Manufacturing Company (TSM), experienced similar declines, each dropping more than 6%.

Investors are also closely monitoring the August jobs report, set to be published on Friday, as it could have a significant impact on the Federal Reserve's decision on interest rates. With inflation showing signs of cooling, policymakers are keeping a watchful eye on the labor market to gauge its performance. Any signs of weakness could push the Fed to pursue a more aggressive rate cut. Currently, traders are pricing in a 39% chance of a 50 basis point cut, compared to the expected 25 basis points, according to the CME FedWatch Tool.

Adding to market concerns, new figures from the Institute for Supply Management (ISM) indicate a slight increase in US manufacturing activity last month. However, the metric also suggests a slowdown in factory activity, with a reading below the threshold that indicates a contraction in the manufacturing sector.

The decline in stocks reflects the cautious approach taken by investors following the recent market turbulence. Despite enjoying a rebound earlier in August when it climbed nearly 25% in just three weeks after a global market sell-off, Nvidia's stock has been facing headwinds since the release of its underwhelming earnings report. Nevertheless, the stock has still managed to register a gain of over 125% year-to-date.

In other news, drugstore chain Rite Aid emerged as a private company after completing its financial restructuring following Chapter 11 bankruptcy. The company has downsized its operations, closing numerous stores, selling its benefit company, and resolving disputes with lenders.

Overall, the stock market's sharp decline at the start of September has reinforced concerns among investors, particularly in the tech sector. As they await crucial economic data and labor market updates, market participants are cautiously navigating the tumultuous road ahead, prepared for potential shocks and surprises amid this historically challenging month for traders.