Stocks Plunge as Tech Giants Tumble, Fed Speech Looms
In a day marked by significant losses, stocks took a tumble as tech giants experienced a sharp decline. The tech-heavy Nasdaq led the pullback, plunging 1.9 percent to 13,463.97 points. The S&P 500 and the Dow also saw significant drops, with the former tumbling 1.4 percent to 4,376.31 points and the latter clumping 1.1 percent to 34,099.42 points.
Earlier in the day, there was a brief surge in stock prices in response to positive earnings news from chipmaker Nvidia. The company reported fiscal second quarter results that far exceeded analyst estimates and provided upbeat guidance, particularly driven by optimism about demand for AI chips. However, buying interest waned as concerns about the outlook for interest rates continued to weigh on the markets. Market participants anxiously await the economic symposium in Jackson Hole, Wyoming, where global central bank leaders will meet and Federal Reserve Chair Jerome Powell is scheduled to deliver a speech on Friday, which is expected to potentially impact the outlook for interest rates.
According to Danni Hewson, the head of financial analysis at AJ Bell, the tech sector often demands confidence without substantial proof, but the recent advances in AI chips have fueled excitement about a new era of computing. However, concerns about rate hikes and profit-taking ultimately curtailed this confidence.
On the U.S. economic front, the Commerce Department released a report indicating that new orders for U.S. manufactured durable goods unexpectedly tumbled by 5.2 percent in July, following a surge of 4.4 percent in June. Economists had anticipated a more modest decline of 4.0 percent. Excluding transportation equipment, durable goods orders rose by 0.5 percent, exceeding expectations.
The Labor Department also released an unexpected report revealing a modest decrease in first-time claims for U.S. unemployment benefits. Jobless claims slipped to 230,000 in the week ending August 19th, compared to the previous week’s revised level of 240,000. Economists had expected a slight increase to 240,000.
The tech sector, despite Nvidia’s positive earnings news, experienced a significant decline, pulling semiconductor stocks down by 3.4 percent. Airline stocks also saw substantial weakness, with the NYSE Arca Airline Index nosediving 2.9 percent. Networking, computer hardware, and software stocks were also under considerable selling pressure, further weighing on the tech-heavy Nasdaq. Most other major sectors also moved to the downside after experiencing gains during the previous session.
In overseas trading, stock markets across the Asia-Pacific region mostly traded higher on Thursday. Japan’s Nikkei 225 Index advanced 0.9 percent, and Hong Kong’s Hang Seng Index spiked 2.1 percent. Meanwhile, major European markets had a mixed performance, with the UK’s FTSE 100 Index edging up 0.2 percent, the French CAC 40 Index falling 0.4 percent, and the German DAX Index sliding 0.7 percent.
Looking ahead, trading on Friday is likely to be influenced by the speech delivered by Federal Reserve Chair Jerome Powell. Market participants eagerly await any insights that could shed light on the future course of interest rates.
In summary, stocks experienced a sharp decline, especially in the tech sector, as concerns about interest rates weighed on the markets. Positive earnings news from Nvidia provided a brief boost, but the overall sentiment was dampened. Market participants remain cautious ahead of Federal Reserve Chair Jerome Powell’s speech, which is expected to have an impact on the future of interest rates.
