By Chuck Mikolajczak
NEW YORK (Reuters) – U.S. stocks fell on Wednesday as investors digested minutes of the Federal Reserve’s most recent meeting ahead of quarterly results from AI chipmaker Nvidia (NASDAQ:), due after the closing bell.
Stocks struggled for direction for most of the session but weakened after the minutes showed U.S. central bank officials still had faith price pressures would ease, but slowly, due to disappointment over inflation readings.
The Fed’s April 30–May 1 meeting followed three straight months of data that showed sticky inflation, but before more recent reports that showed price pressures could be cooling again.
Investors are focused on whether semiconductor bellwether Nvidia’s first-quarter results can meet sky-high expectations and will test whether the outsized rally in artificial intelligence-related stocks can be sustained.
Nvidia shares, which fell in the session, have surged about 90% this year after rocketing almost 240% in 2023.
“The markets are just waiting for Nvidia to make sure that even if they beat … what does it look like going forward and what is the forward-looking thinking with justifying where valuations are,” said Megan Horneman, chief investment officer at Verdance Capital Advisors in Hunt Valley, Maryland.
“It’s valuations that are more important so regardless of whether it’s a knee-jerk reaction to the upside or to the downside, when we start to parse through that earnings report and look at the valuation that some of these companies are asking for, is it too high?”
According to preliminary data, the S&P 500 lost 14.32 points, or 0.27%, to end at 5,307.09 points, while the Nasdaq Composite lost 31.08 points, or 0.18%, to 16,801.54. The Dow Jones Industrial Average fell 200.21 points, or 0.50%, to 39,672.78.
Stocks’ rally to record highs this month has been fueled in part by AI optimism, a solid earnings season and reignited hopes for rate cuts by the Fed this year.
Analysts polled by Reuters see the closing the year near current levels, at 5,302 points, but warned the index’s strong run means it risks a correction in the coming months.
Markets are pricing in a 59% chance of the Fed cutting rates by at least 25 basis points at its September meeting, down from 65.7% in the prior session, according to CME’s FedWatch Tool.
Chipmaker Analog Devices (NASDAQ:) jumped after forecasting third-quarter revenue above expectations.
Energy was the worst hit sector, down about 2% as oil prices fell for a third straight session.
Retailer Target tumbled after its quarterly earnings and current-quarter forecast missed estimates.
TJ Maxx parent TJX (NYSE:) gained after raising its annual profit forecast.
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