Investing.com-- In evening deals on Wednesday, U.S. stock index futures experienced a minor decline as the earlier surge in technology stocks, particularly Nvidia, began to wane. Investors are also on edge with an impending interest rate decision from the Federal Reserve looming.
Technology sector gains enabled Wall Street to recover from early losses and finish higher on Wednesday. However, a stronger reading on core consumer inflation tempered expectations of a significant interest rate cut by the Fed.
Despite the political turbulence following a heated presidential debate between Vice President Kamala Harris and former President Donald Trump, where Harris seemed to have the upper hand, tech gains helped markets stay resilient.
The Nasdaq Composite fell 0.1% to 5,558.0 points, while the S&P 500 Index slipped 0.1% to 19,252.50 points by 20:12 ET (00:12 GMT). The Dow Jones Industrial Average steadied at 40,893.0 points.
Nvidia Dips in Aftermarket Trade, Tech Rally Cools
NVIDIA Corporation (NASDAQ: NVDA), central to Wall Street's rally on Wednesday, fell 0.2% in aftermarket trading. This came after a significant surge of over 8% during the session.
Nvidia's gains were largely fueled by optimistic comments from CEO Jensen Huang, who highlighted strong demand for its products, especially its latest line of artificial intelligence chips, named Blackwell.
The positive momentum in Nvidia spilled over into the broader technology sector, with hopes that sustained AI demand would support the sector. Yet, the sector is still recovering from a sharp sell-off last week.
The Nasdaq 100 Index rose 1% to 5,554.10 points, while the S&P 500 Technology Index climbed 2.1% to 17,391.16 points on Wednesday. The Dow Jones Technology Index increased by 0.3% to 40,861.71 points.
Strong CPI Reading Dents Hopes for Significant Rate Cut
A stronger-than-expected reading on consumer inflation saw investors reduce their bets on the Fed cutting interest rates by 50 basis points in September.
While headline inflation eased in August, the stronger core reading raised concerns about inflation staying persistently high.
Traders now see an 84% chance of a 25 basis point reduction, up from previous expectations of 66%, according to the CME FedWatch Tool. The likelihood of a 50 basis point cut has dropped to 16% from 34% earlier.
Despite this, the Fed is still expected to cut rates by 25 basis points at its next meeting, initiating an easing cycle that could bring additional rate cuts later this year.
Upcoming Producer Price Index (PPI) data due later on Thursday will provide more insights into U.S. inflation and will be closely monitored, particularly after the strong CPI reading.
Breaking It Down: What This Means for Your Finances
Here’s a straightforward analysis of what this all means:
- Stock Market Movements: The tech sector, especially companies like Nvidia, initially boosted the market but faced a slight decline in futures trading. If you have investments in tech stocks, expect some volatility.
- Inflation Concerns: Higher-than-expected inflation is causing investors to rethink the likelihood of a significant interest rate cut from the Federal Reserve. This affects everything from mortgage rates to the interest on your savings account.
- Federal Reserve Decisions: The Fed’s interest rate decisions directly impact borrowing costs. A smaller rate cut means loans and credit might not get as cheap as some were hoping, which could influence your spending and saving decisions.
- Political Climate: Political debates and outcomes can sway market confidence. The recent debate between Harris and Trump has added an extra layer of uncertainty, which can impact market stability.
In summary, keep an eye on tech stock performance and Federal Reserve announcements, as these will significantly influence your investments and financial planning in the near future.