On Wednesday, the primary indices on Wall Street experienced declines, with the Nasdaq experiencing the most significant drop as technology shares fell ahead of Thanksgiving due to concerns that the Federal Reserve may tread cautiously regarding rate reductions following persistent high U.S. inflation figures.
Reports indicated that consumer spending saw a solid rise in October, indicating that the U.S. economy continued to grow robustly at the beginning of the fourth quarter, yet efforts to lower inflation seemed to have stalled.
Traders increased their expectations that the Fed would reduce borrowing costs by 25 basis points at its upcoming December meeting, as per CME’s FedWatch. Nevertheless, they foresee the central bank maintaining current rates in both January and March meetings.
Investors remained attentive to the consequences of President-elect Donald Trump’s announcement on Monday regarding proposed tariffs of 25% on imports from Mexico and Canada and 10% on goods from China unless they cease the flow of the potent opioid fentanyl and illegal immigrants into the U.S.
Goldman Sachs pointed out in a note earlier this week that escalating tariff policies could hinder the achievement of the 2.0% inflation goal.
As of 01:56 p.m., the Dow Jones Industrial Average dropped by 107.54 points, or 0.24%, settling at 44,752.77, the S&P 500 decreased by 20.04 points, or 0.33%, to 6,001.59, and the Nasdaq Composite fell by 116.33 points, or 0.61%, to 19,059.24.
Dell’s shares plummeted by 11.8%, and HP dropped 6.2% after disappointing quarterly projections, negatively impacting the Information Technology sector, which led the declines among sectors with a 1.3% loss.
The negative sentiment also affected major companies like Nvidia and Microsoft, which saw declines of 1.9% and 0.8% respectively, while the Philadelphia SE Semiconductor Index fell by 2%, reaching its lowest level in over two months.
The Russell 2000 index, which reached a record peak earlier in the week, managed a marginal gain of 0.14%.
Investors also considered data released earlier in the day indicating that the economy grew at a robust pace in the third quarter, while weekly unemployment claims saw another decline last week, leaving the possibility open for another interest-rate reduction from the Federal Reserve in December.
“Inflation has appeared to be a bit more persistent than the Fed would prefer, which may lead to hesitation regarding rate cuts,” stated Scott Welch, Chief Investment Officer at Certuity.
“There are uncertainties surrounding the implications of Trump’s proposed tariff policy, which, if enacted, could be considerably inflationary, leading the Fed to balance its decisions between economic data and the policy agenda of the incoming administration.”
Minutes from the Federal Reserve’s November meeting released on Tuesday revealed that policymakers were unsure about the potential for interest-rate reductions and the extent to which current rates were constraining the economy.
