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Wall Street Tumbles, Yen Surges, Oil Sinks Below $70, VIX Spikes As Traders Brace For Volatile Month: What's Driving Markets Tuesday?

The first trading session of September started with a widespread selloff across risk assets, as traders took a cautious approach ahead of what is historically a volatile month for global markets.

At 1 p.m. in New York, the S&P 500 had dropped 1.6%, while small-cap stocks nosedived 2.7%. The Magnificent Seven, tracked by the Roundhill Magnificent Seven ETF (NYSE:MAGS), offered no safe haven, declining 2.3%.

The CBOE Volatility Index (VIX), often referred to as Wall Street’s “fear gauge,” surged by 20%, reflecting heightened anxiety among investors.

Tech stocks were hit hard, with the Nasdaq 100 down 2.5%, on track for its worst one-day drop since Aug. 1.

Tuesday’s selloff was reminiscent of the market turmoil caused by the unwinding of the yen-dollar carry trade earlier in the summer. This time, the yen jumped 0.8% against the dollar after hawkish comments from Bank of Japan Governor Kazuo Ueda overnight.

Despite the yen’s strength, the U.S. dollar gained 0.2% against a basket of other currencies, buoyed by broader market ...