Wall Street ended slightly lower on Wednesday as hotter-than-expected US inflation added fresh uncertainty over the Federal Reserve’s next rate move, while investors largely stayed on the sidelines ahead of Nvidia’s closely watched earnings.
The Dow Jones Industrial Average fell 113.52 points, or 0.21%, to 53,463.88. The S&P 500 slipped 1.58 points, or 0.02%, to 7,675.70 while the Nasdaq Composite dropped 21.10 points, or 0.08%, to 26,130.20.
The latest data showed US inflation rose 3.7% in the 12 months to July, slightly above the 3.6% expected. The economy meanwhile expanded 1.5% in the second quarter.
The inflation reading has added another layer of uncertainty to the Fed’s policy outlook, with investors now looking towards Fed Chair Kevin Warsh’s speech at Jackson Hole on Friday for clues on the central bank’s next move.
“It wasn’t enough to shift the balance for September’s meeting, but if subsequent data point in the same direction, the Fed may feel more pressure to move off the sidelines,” said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management.
The Fed’s September meeting is now firmly in focus, particularly as the month has historically been a weaker period for equities. The odds of an interest rate hike stood at 38.1%, according to CME FedWatch.
“There is no crisis, it is more about expectations or guidance we are going to get from the Fed and what the Treasury is trying to do. That blends to some uncertainty and basically increases the risk premium,” said Greg Tuorto, head of US small and midcap investing at Goldman Sachs Asset Management.
“But on the other side, on the positive side, the underlying economic environment is really good. Earnings for the companies that we own and some of the larger cap companies are standout,” he said.
Nvidia In The Spotlight
Nvidia was another major focus for investors, with its shares falling 1.6% ahead of its quarterly results.
The chipmaker’s earnings were being closely watched for signs of whether the huge spending wave behind artificial intelligence can continue. Anything short of a stellar performance could revive concerns over whether the AI boom can maintain its momentum.
Healthcare stocks were the weakest performers on the S&P 500, falling 1%.
Moderna dropped 5.8% after its strong gains the previous session, although the stock remained well above levels seen before the company released late-stage cancer vaccine trial data last week alongside Merck.
Meanwhile, Meta gained nearly 1.1% and led gains among megacap stocks after agreeing to pay up to $18 billion and make major changes to Facebook and Instagram to settle US states’ claims that the platforms harmed children. Apple also rose 1.1%.
Intuit fell 3.2% after the TurboTax maker issued an annual revenue forecast below Wall Street expectations. J.M. Smucker, however, gained 4.3% after forecasting a smaller-than-expected decline in annual sales.
CrowdStrike rose 2% ahead of its second-quarter results, which were due after the closing bell.
Market breadth remained weak. On the New York Stock Exchange, declining stocks outnumbered advancers by 1.16 to 1, with 144 new highs and 66 new lows.
The Nasdaq recorded 1,983 advancing stocks against 2,745 decliners, giving a 1.38-to-1 ratio.
The S&P 500 recorded 11 new 52-week highs and three new lows while the Nasdaq posted 68 new highs and 75 new lows.
Trading volume across US exchanges stood at 14.2 billion shares, below the 16.2 billion average over the past 20 trading sessions.
Investors are also keeping an eye on broader inflation risks, particularly after stubborn oil prices, higher government debt and rising inflation expectations pushed Treasury yields to multi-year highs last week. Yields have since eased following support measures announced by the Treasury Department.
Meanwhile, reports citing an Iranian Revolutionary Guards spokesperson said Tehran and Oman had reached agreements over their respective shares of revenue from the Strait of Hormuz.
For now, the market’s attention is firmly split between the Fed’s next move and Nvidia’s results. Dengan inflation proving stickier than expected, investors will be looking closely at whether the AI giant can once again deliver the kind of earnings performance that has helped keep the broader market rally going.
