Wall Street falls as investors worry about rate cuts

Wall Street fell on Thursday with Nvidia, and other AI heavyweights suffering steep losses as investors scaled down expectations of rate cuts because of inflation concerns and disagreements among central banks about the U.S. economic health.

The U.S. Government

Reopened

After a 43-day record shutdown which had alarmed investors and disrupted economic data flow.

Growing Number

Federal Reserve policymakers have in recent days shown hesitation in reducing interest rates further. This has pushed the odds on financial markets for a decrease in borrowing costs by December near parity. Fed officials have recently spoken about their concerns over inflation and the relative stability of the U.S. labor market following two interest rate reductions this year.

The fundamental question to ask is: Is tariff inflation temporary and one-time? Jake Dollarhide is the chief executive officer at Longbow Asset Management, located in Tulsa. It's a gamble, either way.

Investors worried about high valuations fuelled by artificial intelligence optimism caused shares to fall for some of the strongest performers on the U.S. Stock Market in recent years.

Nvidia fell 4.7% in value, Tesla 7.6%, and Broadcom 5.4%.

There are many uncertainties regarding the state of the economic situation. "We're experiencing a slight correction in the AI market and are seeing a market rotation," says Peter Cardillo. He is the chief market economist of Spartan Capital Securities, based in New York.

The S&P500 was down by 1.62% to 6,739.60.

The Dow Jones Industrial Average fell 1.38% to 47,590.87, while the Nasdaq dropped 2.48% to 22825.50.

Eight out of 11 S&P 500 sectors indexes fell, with the information technology sector leading the way, dropping 2.74%. Consumer discretionary followed, losing 2.58%.

Cisco Systems gained 5% in the last few days after increasing its full-year revenue and profit forecasts. The company is betting on demand for networking equipment. The Dow closed at record highs on Tuesday and Wednesday as investors moved money from technology stocks to the health care sector.

The S&P 500 growth index is down 0.7%, while the value index is up 1.4%.

Walt Disney's stock fell 7.7% when the media giant indicated it was preparing to fight YouTube TV for distribution rights of its cable channels. Recent data from ADP, the payroll processor, showed that private employers lost over 11,000 jobs per week from late October to now. Indeed Hiring Lab also showed a drop of 16% in retail job postings from last year in October.

According to CME Group’s FedWatch tool, traders are pricing in a probability of 47% for a rate cut of 25 basis points in December. This is lower than the 70% last week.

APA Corp rose 3.2% following a report that Spain’s Repsol was considering a reverse merge of its upstream division with potential partners including the energy company. Memory device makers Western Digital (down 3.1%) and SanDisk (down 10.7%) both fell after Japanese memory maker Kioxia Holdings announced lower sales and profits.

The S&P 500 saw a 1.8 to 1 ratio of declining stocks over rising ones.

The S&P 500 recorded 15 new highs, and 6 new lowers. The Nasdaq registered 51 new highs, and 178 lows.

(source: Reuters)