The final results of the session indicate that the Dow Jones Industrial Average closed nearly flat (+0.04%).
The Nasdaq index, heavily populated by technology stocks, fell by 0.67%, and the broader S&P 500 index declined by 0.24%.
“Risk aversion sentiment dominated Wall Street today, with the ‘magnificent seven’ (a nickname for the tech giants) dragging the stock indices down,” noted José Torres from Interactive Brokers.
Alphabet (-1.12%), Amazon (-1.84%), Apple (-1.97%), Meta (-0.50%), Microsoft (-0.79%), Nvidia (-0.14%), and Tesla (-1.64%) all closed in the red.
“We simply reached a point where many of them were overbought,” emphasized Tim Urbanowicz from Innovator Capital Management to AFP.
A trigger for this was the release earlier this week of a Massachusetts Institute of Technology (MIT) report that put the profitability of investments in Artificial Intelligence (AI) into perspective for companies.
Given “the level of valuation” of these companies, it is necessary to maintain “caution” and avoid “overconfidence” in these stocks, warned Tim Urbanowicz.
Simultaneously, “investors are wondering if the Federal Reserve Chairman, Jerome Powell, will support a dovish policy on Friday during his speech at the Annual Jackson Hole Symposium,” pointed out José Torres.
The vast majority of investors expect an interest rate cut at the next Fed meeting on September 16 and 17, according to CME’s FedWatch tool.
It is “very surprising that the market is showing such a degree of confidence” when inflation in the United States remains high and above the Fed’s mandate, stressed Tim Urbanowicz.
According to the analyst, this is due “largely” to numerous pressures from the U.S. President, Donald Trump, “to encourage the Fed to reduce its interest rates.”
Key members of the U.S. central bank expressed divergent opinions on the monetary policy to be implemented, according to a report of their discussions at the end of July, published today.
Several expressed concern about rising risks in the labor market.
Overall, all members are cautious, stating they are ready to “adjust the economic stance should risks arise that could thwart the Fed’s objectives.”
In the bond market, the yield on 10-year U.S. government bonds slightly fell to 4.29%, compared to 4.31% at Tuesday’s close.
In other sectors, the semiconductor industry suffered from media reports that the U.S. government was considering converting subsidies granted through the “Chips Act” into equity investments. Intel lost 6.99%, TSMC fell by 1.76%, and Micron declined by 3.97%.
