A street sign at the corner of Wall Street and South Street in New York's Financial District is pictured on Tuesday, November 26, 2024. The photo was taken by Peter Morgan for the Associated Press.
Major U.S. stock indexes took a hit Wednesday, largely due to declining Big Tech shares. The S&P 500 dropped 0.4%, while the Dow Jones Industrial Average slipped 0.3%, falling from its record high on Tuesday. The tech-heavy Nasdaq composite saw a sharper loss, declining 0.6%.
Leading the downturn were tech giants Nvidia, Microsoft, and Broadcom. Nvidia fell 1.6%, and Microsoft slipped 0.9%, with their significant market weights amplifying their impact on the broader indexes. Meanwhile, PC makers like Dell and HP exacerbated the decline. Dell plunged 12.2% after reporting revenue that failed to meet expectations, while HP fell 11.4% following a weaker-than-anticipated earnings forecast.
In contrast, gains in sectors like finance and healthcare offered some balance. Visa added 0.9%, and Thermo Fisher Scientific climbed 2.3%. However, these upticks were not enough to counteract the weight of tech losses.
Mixed Signals from Consumer Spending and Inflation
The U.S. economy continues to show resilience, with a robust 2.8% annual growth rate in the third quarter, according to the Commerce Department. This growth stems from strong consumer spending and increased exports. However, new data reveals that inflationary pressures remain a concern.
The personal consumption expenditures index (PCE), the Federal Reserve’s preferred inflation gauge, rose to 2.3% in October from 2.1% in September. While inflation has broadly declined since peaking over two years ago, the recent uptick signals a potential stalling of progress.
In response to inflation, the Federal Reserve initiated interest rate cuts in September and November, with another cut anticipated in December. Yet, concerns remain that unforeseen policy shifts, such as potential new tariffs proposed by President-elect Donald Trump, could disrupt this trajectory.
Retail Earnings Reflect Consumer Uncertainty
Recent retail earnings underscore a mixed outlook for consumer spending. Nordstrom reported weakening sales since October, leading to an 8.5% drop in its stock price. In contrast, Urban Outfitters surged 19.1% after exceeding financial forecasts for the third quarter. These results mirror earlier diverging forecasts from Target and Walmart, highlighting consumers' cautious spending amidst inflationary pressures.
Bond Market Reflects Cooling Yields
In the bond market, Treasury yields edged lower. The 10-year Treasury yield dipped to 4.25% from 4.30%, while the two-year yield fell to 4.22% from 4.25%, reflecting expectations of further Federal Reserve actions.
With markets closing Thursday for Thanksgiving and reopening briefly on Friday, investors will continue to watch inflation trends and Federal Reserve signals closely.
