Wall Street retreats
US stock indices closed lower on Wednesday, with losses led by small cap stocks and technology. The S&P 500 and NASDAQ both lost 0.3%, the Dow fell 0.4%, while the small cap Russell 2000 ended the day 0.9% lower. Investors trimmed their exposure to the artificial intelligence (AI) trade in a move which saw NVIDIA fall for a second day.
Source: TN Trader
The generative AI chip designer pulled back further from Monday’s record intra-day high, which followed news of its $100 billion investment in OpenAI, owner of ChatGPT. Markets reacted positively to the news initially. But then concerns were raised about the circularity of the investment, suggesting that NVIDIA shouldn’t have to fund its customers to help them to buy its chips.
Meanwhile, Intel continues to fight back. Stock in the troubled US chipmaker soared this morning, hitting its highest level since July last year. Intel has jumped around 35% over the past week.
The rally overnight came after Bloomberg reported that Intel is seeking an investment from Apple, raising hopes for further strategic alliances and fresh capital. If successful, this would add to NVIDIA's promised $5 billion investment, along with a commitment to collaborate on new products. Bear in mind that the Trump administration purchased a 10% equity stake in Intel last month for $8.9 billion.
US stock index futures were mixed, but little changed, in early trade this morning. Traders have dialled back their Fed rate cut expectations a touch. This followed a speech from Federal Reserve Bank of San Francisco President Mary Daly yesterday. She said further interest-rate cuts would probably be required, but that the Fed should exercise caution.
On Tuesday, Fed Chair Jerome Powell had sounded quite hawkish when he suggested that the path for future rate cuts was far from clear and that the US central bank faced a “challenging situation.” He added that: “…equity prices are fairly highly valued.” There are more Fed speakers expected today, while there’s also a stack of economic data, including an update on second quarter GDP, Durable Goods, weekly Unemployment Claims and Existing Home Sales.
Yesterday saw New Home Sales beat expectations by around 23%. But analysts were quick to call out the number as an anomaly. The surge came as builders offered discounts and other sales incentives to help encourage buyers in what is still a very jittery housing market.
The weekly Unemployment Claims number is now a key data point for investors. Fed Chair Jerome Powell has emphasised that slowing labour market conditions are weighing more heavily on policy decisions than sticky inflation, noting “a marked slowdown” in supply and demand dynamics.
Despite this, tomorrow’s Core PCE inflation update may also shift investor expectations over the speed and depth of additional easing measures from the US central bank.