NEW YORK – Wall Street’s main indexes closed slightly lower on Aug 26 after a US inflation reading came in hotter than expected, while many investors stuck to the sidelines ahead of AI bellwether Nvidia’s earnings later in the day.
A Commerce Department report showed annual US inflation increased 3.7 per cent in the 12 months through July, a touch above expectations.
Separate data showed the economy grew 1.5 per cent in the second quarter.
The latest print added another wrinkle to the Federal Reserve’s policy outlook, raising the stakes for upcoming economic data.
Investors will focus sharply on Fed chairman Kevin Warsh’s Jackson Hole speech on Aug 28.
“It wasn’t enough to shift the balance for September’s meeting, but if subsequent data point in the same direction, the Fed may feel more pressure to move off the sidelines,” said Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management.
The central bank’s next scheduled meeting is in September, putting the policy decision in focus during what is historically a weak month for equities. Odds of an interest rate hike at that meeting stand at 38.1 per cent, according to the CME FedWatch tool.
“There is no crisis, it is more about expectations or guidance we are going to get from the Fed and what the Treasury is trying to do. That blends to some uncertainty and basically increases the risk premium,” said Greg Tuorto, head of US small and midcap investing at Goldman Sachs Asset Management.
“But on the other side, on the positive side, the underlying economic environment is really good. Earnings for the companies that we own and some of the larger cap companies are standout,” he said.
The Dow Jones Industrial Average fell 113.52 points, or 0.21 per cent, to 53,463.88, the S&P 500 lost 1.58 points, or 0.02 per cent, to 7,675.70 and the Nasdaq Composite lost 21.10 points, or 0.08 per cent, to 26,130.20.
Eyes on Nvidia for verdict on AI
Nvidia shares were down 1.6 per cent ahead of its closely watched quarterly update. Anything less than a stellar report from the chip giant could rekindle doubts about the sustainability of the AI boom.
Shares in cybersecurity firm CrowdStrike were up 2 per cent ahead of second-quarter results, due out after closing bell.
On the S&P 500, healthcare stocks were the biggest laggards, down 1 per cent. Moderna fell 5.8 per cent, after strong gains on Aug 25 although the stock remained well above the levels before the company disclosed a late-stage cancer vaccine trial data last week, alongside Merck.
Meta rose almost 1.1 per cent and was leading gains among megacaps after it agreed to pay up to US$18 billion and make major changes to Facebook and Instagram to resolve US states’ claims of harm to children.
Apple gained 1.1 per cent.
Shares of Intuit fell 3.2 per cent after the TurboTax maker forecast annual revenue below Wall Street expectations.
J.M. Smucker gained 4.3 per cent after the Folgers coffee maker forecast a smaller-than-expected decline in annual sales.
Meanwhile, a report, citing Iran’s Revolutionary Guards spokesperson, said Tehran and Oman have reached agreements on their share of the Strait of Hormuz and its revenue.
Worries over stubbornly high oil prices, rising government debt and inflation expectations had pushed Treasury yields to multi-year highs last week, although they retreated after the Treasury Department announced support measures.
Declining issues outnumbered advancers by a 1.16-to-1 ratio on the NYSE.
There were 144 new highs and 66 new lows on the NYSE.
On the Nasdaq, 1,983 stocks rose and 2,745 fell as declining issues outnumbered advancers by a 1.38-to-1 ratio.
The S&P 500 posted 11 new 52-week highs and 3 new lows while the Nasdaq Composite recorded 68 new highs and 75 new lows.
Volume on US exchanges was 14.2 billion shares, compared with the 16.2 billion average for the full session over the last 20 trading days. REUTERS
