On Wednesday, the US stock market faced a significant downturn, with the S&P 500 marking its fourth consecutive loss as tech stocks led the broader market lower. The decline was evident throughout the trading session, particularly impacting tech-heavy indexes like the Nasdaq, which experienced a drop of over 1%. Among the tech sector, notable stocks such as Nvidia saw a substantial decline of nearly 4%, contributing to the sector’s overall weakness. Other tech giants, including Netflix, Meta, Apple, and Microsoft, also registered losses, reflecting a broad-based downturn in the tech industry.
Investor sentiment was largely influenced by concerns surrounding the prospect of sustained higher interest rates, following hawkish remarks from Federal Reserve Chair Jerome Powell earlier in the week. Powell’s comments, coupled with a higher-than-expected inflation report for March, prompted investors to reassess their expectations regarding the trajectory of interest rates. Powell emphasized the necessity for greater confidence in inflation returning to the Fed’s 2% target before considering any rate cuts, signaling the possibility of prolonged higher rates than previously anticipated.
The release of the April Beige Book by the Federal Reserve further underscored concerns about inflation, with some central bankers expressing apprehensions about a potential resurgence in inflationary pressures. While contacts in various districts expected inflation to maintain a slow pace moving forward, certain sectors, particularly manufacturers, perceived upside risks to near-term inflation in both input and output prices.
Market expectations regarding Fed policy have shifted in response to Powell’s remarks, with a June rate cut now seen as unlikely. According to the CME FedWatch tool, there is only a 16% probability of a rate cut at the June FOMC meeting. Additionally, December interest rate projections suggest that most investors anticipate only 1-2 rate cuts by the end of the year, a significant reduction from the six rate cuts anticipated earlier in the year.
Investors are eagerly awaiting further guidance on Fed policy, with comments from Fed officials expected after the closing bell and throughout Thursday. These remarks could provide additional insight into the Fed’s stance and its implications for the remainder of the year.
At the close of trading on Wednesday, the major indexes stood as follows:
- S&P 500: 5,022.21, down 0.58%
- Dow Jones Industrial Average: 37,753.31, down 0.12% (-45.66 points)
- Nasdaq Composite: 15,683.37, down 1.15%
In addition to developments in the stock market, various factors in the broader financial landscape, including Elon Musk’s pay-deal vote for Tesla, projections of a market “reset,” and concerns over a US freight recession, captured investors’ attention. Fluctuations were also observed in commodities, bonds, and cryptocurrencies, with notable movements in crude oil, gold, Treasury yields, and Bitcoin.
