Concerns about inflation caused a slowdown in the US stock market.
Currently, Nvidia shares are making US investors happy. However, the overall sentiment remains subdued due to the latest Fed minutes, which haven't indicated any signs of interest rate cuts. This is causing a ripple effect throughout the market.
Inflation worries are putting a damper on the US stock markets. While the news of a potential boom in artificial intelligence (AI) has left investors from chip manufacturer Nvidia feeling optimistic, the rest of the market isn't feeling the same way. The Dow Jones index of blue chips closed 1.5% lower at 39,065 points, the S&P 500 index lost 0.7% to 5267 points, and the Nasdaq technology index fell 0.4% to 16,736 points.
Nvidia's shares were on a high, surpassing the $1000 mark for the first time and closing up 9.3% at $1037. Nvidia is anticipating sales of around $28 billion in the current quarter, which is $1.4 billion more than what analysts had expected on average. This has further fueled investors' hope for a sustained boom in the AI sector. As Brian Jacobsen, chief economist at Annex Wealth Management, puts it, "(...) But I'm worried if that doesn't fizzle out after a while."
The minutes from the Fed's most recent meeting have cast doubt on the possibility of a US interest rate cut in the near future. Inflation is not easing as quickly as central bankers had hoped. Kyle Rodda, an analyst at trading platform Capital.com, commented, "One interesting takeaway from the last 24 hours is that central banks are still unsure about shaping policy and how high interest rates need to be to contain inflation."
There's a 60 and 70% chance of an interest rate turnaround by the Fed at its September and November meetings, respectively, according to futures markets. Some analysts even suggest that the first rate cut might not happen until 2025. The recent signs of a stronger economy and a robust US labor market have also raised questions about whether the Fed will need to make moves sooner than expected. "If we see an acceleration in economic growth, it means that the Fed could wait longer before making any decisions. That's caused a bit of a lull in the markets right now," said economist Jacobsen.
Live Nation's shares dropped by 7.8%, and the company is facing a lawsuit filed by the Department of Justice, 30 states, and others, alleging illegal ticket price inflation and harm to artists. The goal is to split up the company, which has hundreds of well-known artists under contract, owns concert halls, and controls a significant portion of the market for concert tickets through Ticketmaster. Boeing's shares also fell by 7.6%, as CFO Brian West told investors that the beleaguered aircraft manufacturer will likely burn through more money than it generates in 2024. He expects a negative free cash flow for the year as a whole, West said at an industry conference.
Deliveries are not expected to rise in the second quarter, and there have been delays in deliveries to China recently. Tesla shares dropped by 3.5%, and the e-car manufacturer appears to have given up on its goal of selling as many cars as Volkswagen and Toyota combined. The target of hitting 20 million cars per year by 2030 no longer appears in the annual sustainability report. Musk had announced this goal back in 2020.
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Despite Elon Musk's leadership at Tesla Motors, the company's shares experienced a 3.5% drop due to delays in deliveries and uncertainty about meeting sales targets. This news comes as a contrast to the surge in Nvidia's shares, which reached over $1000 for the first time, driven by high anticipations in the AI sector. However, the overall market sentiment remains affected by the Fed's indications of no imminent interest rate cuts, leading to a slowdown in various indices like the Dow Jones, S&P 500, and Nasdaq.
Source: www.ntv.de
