U.S. investors experience a decline due to Nvidia's influence
Tech Shares Take a Hit in US Markets as Investors Cash Out, Leading to an 11% Drop in Some Stocks Over Few Days
The opening days of the fresh trading week in the US saw mixed results. The Dow Jones gained 0.7%, reaching 39,411 points, while the S&P 500 dropped 0.3% and the Nasdaq Composite lost 1.1%. The trend of selling high-performing shares, particularly tech stocks, continued, as they had been inflated due to AI hype since the start of the year. At the NYSE, there were 806 winners versus 1,353 losers, with 87 titles remaining unchanged.
Fresh stimuli for the broader market were lacking following the decline in options and futures on indices and individual stocks towards the end of the week. The degree to which artificial intelligence and interest rate cuts by the US Federal Reserve will continue to boost short-term price increases is a topic of debate. The upcoming new price data, which may prompt speculation about the timing of the first US interest rate cut, could provide the next catalyst.
AI Euphoria Cooling Down?
Market strategist Emily Bowersock Hill of Bowersock Capital Partners was optimistic about the market. "The continuous upward trend of the stock market is likely to continue in the short term. Inflation data is expected to continue surprising the market positively, and the Fed will likely be able to carry out the planned single interest rate cut," she said. However, other voices raised concerns about a potential correction in the sizzling tech sector. After all, the AI boom must eventually prove that it is generating profits for companies on a large scale.
Nvidia's downturn served as a warning, as its stock dropped more than 3% from its record high in the two previous trading days. This raised concerns about a possible decline in the AI euphoria – not just for Nvidia. On Monday, the stock fell another 6.7%.
Anticipation for EU-China Trade Agreement
After the modest decrease in bond yields at the end of the week, they fell again. The probability of an interest rate cut in September is estimated at around 66% on the yield curve market.
The Dollar weakened against an attractive Euro, with the Dollar Index losing 0.3%. The European Union's common currency was buoyed by hope that a trade war between China and the EU could still be avoided. In trade news, there were discussions about planned tariffs between the parties.
Oil prices experienced a positive trend and tended to firm up towards the end. The falling dollar also supported the gold price, with a plus.
Boeing Unaffected by Negative Reports
In the Dow-Jones-Index, IBM gained 1.5% after Goldman Sachs upgraded its outlook on the stock. Boeing rose by 1.4%, remaining unaffected by a report suggesting the Department of Justice intends to recommend charging the aircraft manufacturer in relation to two fatal 737-Max crashes in October 2018 and March 2019.
Apple improved by 0.3%. According to the Wall Street Journal, Apple has reportedly held talks with Meta Platforms regarding the integration of their generative AI model into Apple Intelligence. Additionally, the EU has informed Apple that its App Store rules may violate EU digital market laws.
UPS gained 1.5%. The company is selling its freight brokerage business to RXO for approximately $1 billion. This is less than UPS paid for the same asset in 2015. Under Armour is suing for $434 million to settle a long-running lawsuit. The lawsuit alleges that co-founder Kevin Plank deceived investors. Under Armour rose by 2%.
More information about today's stock market developments can be found here.
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Wall Street analysts are closely watching the Interest rate turnaround, as the potential for a cut by the US Federal Reserve could impact tech stocks like Nvidia that have been affected by the cooling Down of the AI Euphoria. The Interest rate policy shift could also influence the performance of other tech companies listed on Wall Street.
In response to the market trends and the potential for an interest rate cut, market strategist Emily Bowersock Hill of Bowersock Capital Partners suggested that investors might want to consider diversifying their portfolios beyond tech stocks and considering companies that stand to benefit from a lower Interest rate environment.
