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US stocks came under heavy selling pressure Thursday as weak economic data and another sharp sell-off in chip stocks spurred losses across all three major indexes one day after the Federal Reserve signaled a likely rate cut in September.

The tech-heavy Nasdaq Composite ( ^IXIC ) led losses, falling 2.3% after opening Thursday's session in green figures. Philly Semiconductor Index ( ^SOX ) fell more than 7% as Arm Holdings ( ARM ) fell 15% after disappointing results , dragging down other market leaders including Nvidia ( NVDA ) and AMD ( AMD ), which fell more than 6% and 8%, respectively.

The benchmark S&P 500 ( ^GSPC ) fell 1.4% while the Dow Jones Industrial Average ( ^DJI ) lost 494 points, or 1.2%.

The 10-year Treasury ( ^TNX ) yield moved below the 4% level for the first time since February, hovering near 3.98% after several weak economic data points crossed on Thursday morning.

The interest rate-sensitive Russell 2000 ( ^RUT ) index, which had been rallying over the past month as markets priced in a high likelihood of a Fed rate cut in September, fell more than 3% on Thursday.

The latest ISM data out on Thursday showed the US manufacturing sector sank further into contraction territory during July. Other releases showed jobless claims rose to an 11-month high last week and construction spending unexpectedly declined in June.

Piper Sandler's chief investment strategist Michael Kantrowitz reasoned Thursday's action showed markets digesting recent economic data as "bad news," despite potentially pointing to steeper Fed rate cuts in 2024.

"When yields go down it could still be a good thing going forward if it comes from lower inflation," Kantrowitz told Yahoo Finance. "But [not] if it comes from higher unemployment, bad [manufacturing data], bad earnings, and bad macro data."

Kantrowitz added that slower economic data may have been "good news a year ago when everyone was worried about inflation — that's not the case today."

And with a September rate cut from the Fed all but certain after Wednesday's policy announcement , investors on Thursday moved to price in even more aggressive moves from the central bank this year. Data from the CME Group showed traders pricing in a roughly 25% of a 50 basis point rate cut in September, up from just an 11% chance one day ago.

The next key data release will come on Friday, with the release of the July jobs report, which is expected to show the US economy added 175,000 jobs last month with the unemployment rate holding at 4.1%.

Some individuals stocks were able to find a reprieve on Thursday after positive quarterly earnings reports, most notably by Meta ( META ), which rose 4.4% after the social media giant reported better-than-expected results on Wednesday afternoon .

After the bell, big tech provided a mixed bag of corporate results. Apple ( AAPL ) shares were modestly higher after the iPhone maker reported better than expected third quarter results . Meanwhile, Amazon ( AMZN ) stock fell more than 4% after the company's current quarter revenue guidance fell short of Wall Street's expectations.