On the 24th, New York time, Wall Street moved mixed as a web of market variables collided. The blue chip-heavy Dow Jones Industrial Average rose, but the tech-heavy Nasdaq and the large-cap Standard & Poor's (S&P) 500 fell. Selling swept across tech stocks ahead of Nvidia's earnings, the bellwether for AI chips. Analysts said investors turned cautious as major geopolitical risks stacked up, including President Donald Trump's flagged high tariff on Canadian imports and strong economic sanctions aimed at Iran.
On the New York Stock Exchange, the Dow Jones Industrial Average finished up 140.15 points, or 0.26%, at 53,417.16 from the previous session. By contrast, the S&P 500 fell 21.51 points, or 0.28%, to 7,652.86, and the Nasdaq composite closed down 200.26 points, or 0.76%, at 25,980.19.
Semiconductor-related shares that had led the market fell on the day. Nvidia dropped more than 2%, marking a seven-transaction-day losing streak for the first time since September 2022. Reports said Nvidia notified buyer companies it would raise prices by more than 15% for its newly launched AI chip Vera Rubin and its Blackwell servers, chilling sentiment. Raising prices on flagship products can lift corporate profitability in the short term. But investors worried it could, over the longer term, spur customer churn or slow market demand.
Micron Technology, grouped with semiconductor plays, plunged more than 5%, and AMD and Broadcom both fell in the 2% range. The iShares Semiconductor ETF, which tracks semiconductor corporations' shares, also slid about 3%. Tatiana Darie, a Market Live macro strategist, said, "As the sense grows that AI adoption has peaked, risk appetite is weakening," and added, "This sentiment is dealing an uneven blow to equipment suppliers tied to AI."
U.S. Government Bonds yields fell. There was word the Treasury could deploy as much as $1 trillion in general account funds to buy long-dated Government Bonds while issuing short-dated Government Bonds, a so-called Treasury twist operation. Typically, when Government Bonds yields fall, it's a tailwind for equities. If the appeal of Government Bonds, a relatively safe asset versus stocks, diminishes, cash in the market is more likely to flow into equities.
But the move instead stoked market nerves. Mohamed El-Erian, chief economic adviser at global asset manager Allianz, criticized the Treasury's market intervention as "a jittery strategy that undermines investor confidence." He noted the twist is "a band-aid measure that forces rates lower without solving the fundamental issue of massive funding needs by the government and technology corporations." Peter Boockvar, chief investment officer at OnePoint BFG Wealth Partners, also warned, "The Treasury's attempt to suppress long-term rates by issuing short-term debt will end up tying the U.S. government's interest burden even more tightly to the Federal Reserve's policy rate."
The renewed prospect of a U.S.-Iran clash in the Middle East also weighed on stocks. Treasury Secretary Scott Bessent unveiled an economic D-Day operation to completely isolate Iran from the global economic system. The Trump administration has signaled it will impose "the toughest sanctions in history" to end the six-month war. It is pressing allies as well as countries around the world to sever their economic ties with Iran.
Fears of a renewed global trade war also resurfaced. President Trump, after trade talks with Canada collapsed, declared he would impose a 50% tariff starting Jan. 1 next year on all cars and parts and on steel imported from Canada. The news sent the Canadian dollar lower. By contrast, shares of U.S. steel corporations Nucor and Steel Dynamics jumped to a record high on expectations of windfall gains from higher entry barriers for foreign rivals. Bank of America economist Carlos Capistran said, "While the tariff's hit to the real economy will likely be limited, the bigger issue is a dent to investor and corporate confidence," adding, "Economic uncertainty can chill investment."
Investors are focused on Nvidia's earnings on the 26th, seen as a bellwether for the semiconductor cycle, and on the personal consumption expenditures price index, the Federal Reserve's preferred inflation gauge. On the 28th, Federal Reserve Chair Kevin Warsh will deliver a keynote at the Jackson Hole meeting. With recent inflation pressures and ballooning national liability, global financial markets are watching what monetary policy direction Warsh will outline.