Stock Market Slump Rears Its Head
The US stock market's impressive recovery takes a breather as the major indexes close in the red. The Fed meeting minutes and gloomy retail outlooks combine to dampen investor enthusiasm.
After the release of the Fed minutes, the US stock markets closed on a down note. The venerable Dow Jones index of blue-chip stocks fell 0.2% to 35,088 points. The tech-heavy Nasdaq slipped 0.6% to 14,199 points, while the broad-based S&P 500 ended the day 0.2% lower at 4538 points.
The release of the Fed's meeting minutes barely made a ripple on the market. With a series of aggressive interest rate hikes, the Fed is now more cautious, as evidenced by the minutes. The consensus among those involved was to proceed with caution. However, if progress towards the inflation target of 2% is deemed insufficient, further tightening of monetary policy would be appropriate in the monetary authorities' view. Despite this cautious stance, traders expect interest rates to fall next year. An easing is already priced in for May 2024 and is fully expected for June.
Negative forecasts from several US retailers painted a bleak picture for consumer spending. Kohl's investors were dismayed by shrinking sales in the quarter, causing the department store chain's shares to plummet by almost 9%. Pessimistic outlooks from Lowe's and Best Buy led to a decline in the DIY chain's shares by more than 3% and the electronics retailer's shares by around 1%. American Eagle Outfitters' shares slumped by almost 16% following a dismal forecast. On the other hand, sports retailers Dick's Sporting Goods and Hibbett saw their annual targets rise, causing their shares to gain 2.2% and almost 10% respectively.
The tech sector eagerly awaited the quarterly figures of chip designer Nvidia, which were due after the market close. Market participants expect another strong sales forecast, but the focus will be on the impact of the extended US restrictions on the sale of its high-end chips to China. These figures are seen as a litmus test for big tech stocks, whose ascent this year has powered the S&P 500's gains. Shares in Nvidia fell by just under 1% in anticipation. Other mega-cap stocks like Intel and Microsoft also dipped by up to 2.4%.
Amazon shares slipped by 1.5% to $143.9. According to a report by CNBC, CEO Jeff Bezos is planning to sell more shares in the online retailer on Tuesday, potentially offloading eight to ten million shares worth over a billion dollars.
Following the Fed minutes' release, the Dow Jones index experienced a minor setback. Share prices of retailers like Kohl's and Best Buy also saw a drop due to their pessimistic outlooks.
Insights:
- The US stock market's rally was influenced by several factors, including tariff threats, economic uncertainty, and Fed Chair Powell's testimony.
- The Fed's cautious stance on interest rates and inflation did not significantly disrupt the market rally but contributed to broader economic uncertainty.
- Retailers' positive outlook was overshadowed by concerns about tariffs and potential stock market corrections.
- The release of the Fed minutes did not have a significant impact on the market indices but provided context about the Fed's stance on interest rates and inflation.
