A rally in Big Tech sputtered as bond yields rose, with traders weighing remarks from a batch of Federal Reserve officials for clues on the outlook for interest rates ahead of Jerome Powell’s speech on Friday.
(Bloomberg) — A rally in Big Tech sputtered as bond yields rose, with traders weighing remarks from a batch of Federal Reserve officials for clues on the outlook for interest rates ahead of Jerome Powell’s speech on Friday.
The Nasdaq 100 Index tumbled 2.2% for its worst day since Aug. 2, with Nvidia Corp. trimming most of an advance that sent the chipmaker to an all-time high following another strong sales forecast. The Philadelphia Semiconductor Index fell 3.4%. The S&P 500 Index slumped 1.4%, after notching a 0.5% jump in the first half hour of trading. All of the 11 industry groups were lower, led by declines in information technology and communication services. The Dow Jones Industrial Average slid 1.1% — its worst drop since early May.
Bond yields edged higher after data showed fewer workers applied for unemployment benefits last week, a sign the job market remains resilient despite high rates. A separate report said orders for long-lasting manufactured goods fell more than expected last month, with conditions worsening for the manufacturing industry.
Read more: Fed Officials See Rates Close to Peak, Differ on How Close
The Fed’s symposium in Jackson Hole, Wyoming, kicked off Thursday and features appearances from various central banker leaders, including Powell on Friday. Investors are awaiting his remarks for clues on whether the central bank has longer to go in its interest-rate hiking cycle. Two officials said policymakers may be close to being done with rate increases, while a former one held back from ruling out further hikes until inflation is more clearly on a downward path.
“We believe the trajectory of the market from here will depend heavily on the Fed’s restraint in hiking rates for the next couple of months, even as they see inflation numbers beginning to rise again,” wrote Brett Ewing, chief market strategist at First Franklin Financial Services.
With just a few days left in the month, the S&P 500 and Nasdaq 100 are on track for their worst month of the year. The yield on the 10-year Treasury rose to 4.22% from 4.20% late Wednesday and down from 4.33% a day before, which was close to its highest level since 2007. Treasury two-year yields, which are more sensitive to imminent policy moves, hovered near 5%.
Nvidia, which has the fourth-biggest weighting in the broader S&P 500, took the steam out of the broader market once shares gave up some of their initial gains, with traders attributing the move to profit-taking following the stock’s big run-up this year. The chipmaker is at the forefront of an industry-wide artificial intelligence race and delivered a third-straight sales forecast that surpassed Wall Street estimates.
“There seems to be a bit of a hangover today as the semiconductor sector opened up strongly on sentiment but then rapidly fell into the red,” with investors who had positioned for strong numbers “cashed in” after the stock soared over $75 in the past week alone, wrote Louis Navellier, founder and chief investment officer at Navellier & Associates.
Ahead of Powell’s remarks Friday, Fed Bank of Boston President Susan Collins told Yahoo! Finance that rate increases may be necessary, adding that she wasn’t prepared to signal the peak point. Meanwhile, her Philadelphia counterpart Patrick Harker sees rates on hold for the rest of this year, and thinks policymakers have likely undertaken sufficient tightening, telling CNBC that “we’ve probably done enough.” Harker indicated he wasn’t ready to predict when the Fed might start cutting rates.
Meantime, former St. Louis Fed President James Bullard said a pickup in economic activity this summer could delay plans for the Fed to wrap up rate increases. While Bullard no longer serves as a central bank policymaker, the market still largely values his insights on the state of the economy.
SECTORS IN FOCUS:
- Shares of Boeing Co. and its biggest supplier, Spirit AeroSystems Holdings Inc., fell almost 5% and 13%, respectively, after the planemaker disclosed improperly drilled holes in a component that helps maintain cabin pressure within the 737 Max jet.
- Snowflake Inc. sank about 5% after giving a sales outlook for the current quarter in line with expectations, suggesting that companies are still cautious about expanding their cloud software budgets.
- Dollar Tree dropped 13% — its biggest drop since May 2022 — after its earnings forecast fell short of analyst estimates as the company contends with challenges such as higher wages and a less profitable sales mix.
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