The S&P 500 and Nasdaq Composite experienced a decline on Wednesday, influenced by a widespread downturn in the technology sector. Investors assessed the divergent outcomes of retail earnings alongside the recent release of the Federal Reserve’s meeting minutes. The broad market index experienced a decline of 0.24%, concluding at 6,395.78, whereas the tech-centric Nasdaq fell by 0.67%, finishing at 21,172.86. Wednesday signified the fourth consecutive day of declines for the S&P 500 and the second negative session for the Nasdaq. The Dow Jones Industrial Average exhibited an outlier performance, increasing by 16.04 points, or 0.04%, to close at 44,938.31.
Investors persisted in realizing gains from various prominent technology and semiconductor firms, amplifying apprehensions regarding their elevated valuations and the sustainability of the artificial intelligence sector in the long run. Nvidia concluded the session with a slight decline, whereas Advanced Micro Devices and Broadcom each experienced a decrease of approximately 1%. Palantir’s shares experienced a decline of approximately 1%, while Intel saw a more significant drop of around 7%. Mega-cap technology firms Apple, Amazon, Alphabet, and Meta Platforms experienced a decline.
“It’s not unexpected to observe certain investors realizing gains in technology equities, which have experienced a remarkably robust performance – with some appreciating by more than 80% since the lows observed in early April. “Market volume in general is typically quite sparse in late August leading to wider swings than fundamentals would warrant,” stated Carol Schleif, chief market strategist at BMO Private Wealth. In the latest earnings report, Target experienced a 6% decline in its shares following the announcement of another drop in sales and the appointment of a new CEO, set to take office on February 1. Lowe’s, meanwhile, experienced a modest increase following the home improvement retailer’s earnings surpassing expectations.
The minutes from the Federal Reserve’s July meeting, released on Wednesday, indicated that central bankers voiced apprehensions regarding the labor market and inflation. However, a consensus emerged that it was premature to consider lowering interest rates. Policymakers maintained their position on interest rates; however, Fed Governors Christopher Waller and Michelle Bowman expressed dissent, a notable occurrence as it marks the first instance of two voting Fed officials dissenting since 1993. “Participants generally pointed to risks to both sides of the Committee’s dual mandate, emphasizing upside risk to inflation and downside risk to employment,” the minutes indicated. While “a majority of participants judged the upside risk to inflation as the greater of these two risks,” a couple saw “downside risk to employment the more salient risk.”
The release of the minutes precedes remarks from Fed Chair Jerome Powell on Friday, which investors will scrutinize for indications regarding the trajectory of interest rates. According to CME’s FedWatch tool, there is over an 80% probability that the central bank will reduce interest rates at its upcoming policy meeting in September. “If Powell’s language is more hawkish, that could pressure tech stocks even further, as a continuation of these elevated interest rates is generally a headwind for the tech sector.”