Just before a crucial Fed policy meeting and a slew of Big Tech earnings reports, US stocks took a hit, led by a sharp drop in Nvidia (NVDA).
The S&P 500 fell 0.5%, while the Nasdaq Composite slipped 1.3%, as investors braced for earnings from Microsoft (MSFT) and AMD (AMD).
The Dow Jones Industrial Average, in contrast, rose 0.5%.
This week is set to be a nail-biter with the Fed’s interest rate decision, the July jobs report, and earnings from four of the “Magnificent Seven” mega caps.
Investors are on edge, balancing hopes for rate cuts against fears that Big Tech’s AI momentum might be waning.
Semiconductor stocks took a beating on Tuesday, with Nvidia’s shares plummeting 7%.
All eyes are now on Microsoft’s earnings report, expected after the market closes. This will pave the way for results from Apple (AAPL), Amazon (AMZN), and Meta (META) in the coming days.
Wall Street is keenly observing any signs that the massive AI investments are starting to yield results. This comes after a volatile July highlighted the risks of the AI trade, prompting investors to shift from Big Tech to small caps.
Meanwhile, Starbucks (SBUX) and AMD are also slated to report after the bell, adding to the earnings frenzy.
Despite AI concerns, a notable trend this earnings season has been investors’ readiness to back businesses with weak results if they promise a turnaround.
In another key development, the Fed began its July policy meeting on Tuesday. Policymakers are expected to hold borrowing costs steady on Wednesday but hint at a possible rate cut in September.
With encouraging June inflation data, the debate now focuses on the timing and number of cuts this year.
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