On the 19th (local time), technology stocks fell sharply on the New York stock market, dragging down the Nasdaq and the Standard and Poor's (S&P) 500 indices. However, the Dow Jones Industrial Average rose slightly, briefly hitting an all-time high during the session, finishing mixed.
It seems that the rush for artificial intelligence (AI) related stocks, led by NVIDIA, has entered a brief pause. Investors appeared to adopt a wait-and-see attitude ahead of Federal Reserve Chair Jerome Powell's speech at Jackson Hole on the 22nd.
On that day, the large-cap S&P 500 index on the New York Stock Exchange (NYSE) fell 0.6% compared to the previous trading day. The tech-heavy Nasdaq composite index plummeted 1.5% to close at 21,314.952.
In contrast, the Dow Jones Industrial Average closed up by about 10 points (0.02%) at 44,922.27. During the session, the Dow briefly rose to 45,207.39, setting a new all-time high.
The decline on that day was led by semiconductor stocks that were driving the AI rally. NVIDIA's stock fell 3.5%, while AMD and Broadcom dropped by 5.5% and 3.6%, respectively. Data analysis corporation Palantir plummeted more than 9.5%, recording the worst decline among S&P 500 components. Other tech stocks like Tesla, Meta, and Netflix also could not escape weakness.
Jason Bronzetti, Chief Investment Officer (CIO) of Lincoln Financial, noted, "The AI-related transaction is not over, but it could be taking a breather," adding, "Considering that the Nasdaq has risen over 40% since April, it is normal for the market to pause temporarily as it adjusts to the latest economic data and anticipated Fed policies."
Some voices warned of the risk of overvaluation in tech stocks. Apollo Chief Economist Torsten Slok pointed out, "Tesla's price-earnings ratio (PER) is nearly 200 times, and NVIDIA's is at 60 times," noting that "the current situation is remarkably similar to the tech bubble of the 1990s."
The rise in the Dow index was led by home improvement retailer Home Depot and semiconductor corporation Intel. Although Home Depot's second-quarter results fell short of expectations, its stock rose 3.7% as it maintained its annual performance outlook. Intel's stock soared 7% following news that SoftBank plans to invest $2 billion and reports that the U.S. government is considering buying a 10% equity stake.
Now, market participants are turning their attention to the Jackson Hole Economic Symposium in Wyoming. They are expected to look for clues about future interest rate policy in Jerome Powell's speech.
According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds (FF) rate futures market sees an 83% chance that the Fed will lower rates by 0.25 percentage points in September.
Steven Schwartz, a partner at Pioneer Financial, said, "I believe Powell will hint at the possibility of rate cuts in the upcoming September meeting." Conversely, Ian Linzen, a strategist at BMO Capital Markets, stated, "The biggest risk that the Treasury considers is if Powell douses the widely expected September rate cut with cold water."