Wall Street experiences a setback due to doubts expressed by the Federal Reserve
Stock Market Dips as Fed's Inflation Concerns Mount
Wall Street is eagerly awaiting Nvidia's earnings report after the market closes today, with investors hoping that the tech giant's outlook on AI development will offer a respite from trade tensions. However, the Federal Reserve's renewed concerns about higher inflation have pushed indices into negative territory.
After strong gains the previous day, Wall Street opened lower mid-week. Investors held back from making new purchases until Nvidia's earnings report and outlook were released, with traders cautioning about "disappointment potential" surrounding the AI icon in the semiconductor sector. The primary concern is how export restrictions and tariffs will impact the company's long-term projections. In addition, the Fed and the bond market provided some headwinds, with yields ticking up modestly.
The Dow Jones Index closed 0.6% lower at 42,099 points, while the S&P 500 and Nasdaq Composite fell 0.6% and 0.5%, respectively. Preliminary data showed 702 advancers (compared to 2,411 on Tuesday) and 2,080 decliners (compared to 380) at the NYSE, with 44 stocks (compared to 35) remaining unchanged.
James Demmert, chief strategist at Main Street Research, highlighted the significance of Nvidia's earnings report for the broader stock market. He suggested that it could "reignite investor optimism and help investors focus on the power of AI rather than Washington's headlines about tariffs and taxes." Following strong gains the previous day, Nvidia's stock showed high volatility and fell 0.5%.
The Fed's meeting minutes released in the evening weighed on stock prices, reaching their daily lows. Fed representatives expressed concerns about potential inflation due to President Donald Trump's trade policies. Another event keeping investors on their toes was an auction of five-year US Treasury notes. While investors faced another test of US bond demand, which had recently been unsettled by Trump's fluctuating policies, the current auction provided relief as it received solid demand, causing yields on the secondary market to retreat from their daily highs.
While the dollar's recovery from the previous day continued, boosted by rising market yields, concerns about slowing US economic growth and the US budget deficit persist. ING analyst Francesco Pesole expects the greenback's recovery to be limited.
Meanwhile, oil prices rose by up to 0.8 percent amid expectations of further sanctions against Russia, although they retreated significantly from their daily highs as the OPEC+ cartel was likely to decide on a production increase on Saturday. The gold price was slightly negative with rising US market interest rates and a strong dollar.
General Motors lost 1.9 percent on the heels of scrapping a significant investment in electric motor production, instead investing multiples of that amount in the production of the latest V8 engines. Salesforce (-0.3%) is acquiring the cloud platform Informatica for $8 billion, while Stellantis fell 3.1 percent, with the automaker having appointed a successor to CEO Carlos Tavares.
Gamestop (-10.9%) plummeted after the video game retailer's initial positive reception of its Bitcoin purchase, with investors spooked by a profit warning at department store chain Macy's, whose stock fell by 0.5 percent. However, Abercrombie & Fitch jumped 14.7 percent, with the retailer posting earnings above market expectations, and Vail Resorts gained 8.8 percent, with former CEO Rob Katz returning to the position at the operator of ski resorts.
The Commission has also been consulted on the draft finance bill, considering the potential investing implications for businesses in the stock market. Given the ongoing concerns about inflation, the Commission may advise cautious approaches to investing in various sectors, including tech companies like Nvidia.
