The New York Stock Exchange experienced a further decline on Tuesday as investors remained cautious ahead of the Federal Reserve's interest rate decision. Rising oil prices intensified the downward pressure on the market.
The Dow Jones Industrial Average closed 0.63% lower at 52,093.11 points. The S&P 500 fell 0.45% to 7,585.73 points, while the Nasdaq 100 lost 0.65% to 28,938 points. The Nasdaq had been under pressure earlier in the week due to debates surrounding artificial intelligence, particularly affecting semiconductor stocks. These stocks showed some recovery on Tuesday.
On Wednesday, the Federal Reserve, led by Chairman Kevin Warsh, is expected to raise interest rates for the first time under his leadership. Market expectations suggest a majority of over 90% anticipate a 0.25 percentage point increase in the interest rate spread. However, there remains significant uncertainty as Warsh has refrained from providing clear signals to the financial markets.
Inflation, driven primarily by higher energy prices, is expected to persist. A trend reversal is not anticipated given the ongoing tensions in the Middle East. Consequently, the yield on ten-year US Treasury notes surged past the 5% mark, as it had on Monday.
Seema Shah from Principal Asset Management noted that the debate has shifted from whether the Federal Reserve will raise rates to the extent of the monetary tightening required to restore price stability. A single rate hike is deemed unlikely.
Brock Weimer from Edward Jones highlighted that inflation has significantly eased compared to its peak in 2022. He expects that any further tightening by the Federal Reserve will be limited in both scope and duration. Weimer does not anticipate that a moderate further rate hike will undermine the overall economic recovery or the bull market in equities.
Within the Nasdaq 100, semiconductor stocks such as Qualcomm, AMD, and Marvell Technology led the gains, with increases ranging from 1.3% to 4.3%. Nvidia, a major player in the sector, saw a more modest gain of 0.6%.
Steel Dynamics, a company in the steel sector, saw a 2% increase following positive industry news. According to Bloomberg, a statement from the Chinese Steel Association on WeChat indicated that leading Chinese steel producers have called for stricter production restrictions and a reduction in inventory levels. The association stated that after years of growth, the steel industry in China is entering a phase of 'reduction and optimization'. Market participants expect this to provide some relief to the global steel market.
However, stocks in the cryptocurrency sector faced pressure. The Bitcoin continued to lose ground after the US Senate blocked comprehensive regulatory legislation. Coinbase's stock fell approximately 10% as a result. Shares of Strategy, a software company that uses Bitcoin as its primary reserve asset, declined by 5.4%.
