Wall Street’s major stock indexes declined on Tuesday, bringing a halt to a two-session recovery in technology shares as stronger-than-anticipated US inflation data for October heightened concerns that the Federal Reserve may maintain elevated interest rates for an extended period.
Earlier in the session, Federal Reserve Governor Christopher Waller called for an interest rate increase of at least 25 basis points in December, even if inflation showed signs of easing in October. He added that a larger 50-basis-point hike could be warranted if price pressures intensified. According to the CME FedWatch tool, traders were factoring in an almost 99% probability of a rate increase next month.
James McCann, Senior Economist at Edward Jones, said renewed concerns about underlying inflationary pressures were creating uncertainty in financial markets. He noted that investors who had recently reduced expectations of further monetary tightening were now being forced to consider the possibility of additional rate increases.
At 9:47 a.m. ET, the Dow Jones Industrial Average declined 257.10 points, or 0.49%, to 52,132.65. The S&P 500 dropped 45.94 points, or 0.61%, to 7,504.00, while the Nasdaq Composite fell 188 points, or 0.74%, to 25,065.14.
Among interest-rate-sensitive sectors, financial stocks edged up 0.15%, while utilities and real estate shares were among the weakest performers. Nine of the 11 major S&P 500 sectors traded lower.
NVIDIA AND ANTHROPIC PUT AI INVESTOR SENTIMENT TO THE TEST
Nvidia shares fell 4.4% following a report by The Information alleging that CEO Jensen Huang’s relationship with Chinese businesswoman Alice Huang, who was alleged to have links to Beijing’s intelligence network, facilitated shipments of at least $7.5 billion worth of the company’s chips through Chinese firms. Huang’s leadership remains a significant consideration for investors given Nvidia’s central role in the global artificial intelligence boom.
Other semiconductor stocks also faced pressure, with the broader Philadelphia Semiconductor Index declining 0.9% after recording gains over the previous two sessions. The movement reflected growing volatility across AI-related investments.
Investors are also monitoring Anthropic’s anticipated stock market debut later this month. The artificial intelligence developer disclosed that its IPO could raise as much as $64.4 billion, potentially placing its fully diluted valuation at up to $1.4 trillion.
Anthropic’s listing could intensify competition among major AI companies seeking to attract investor capital, particularly as questions surrounding the sustainability of AI-related spending continue to influence market sentiment.
Meanwhile, AI cloud infrastructure provider CoreWeave was scheduled to announce its quarterly financial results after Tuesday’s market close. Concerns over the long-term viability of the AI investment boom and the company’s debt obligations have weighed on its shares in recent weeks. CoreWeave gained 0.8%, while rival Nebius declined 1%.
Media company Skydance fell 9% after announcing cost-reduction measures and warning that weaker-than-expected performance from Warner Bros’ film releases could reduce fourth-quarter profits by as much as $200 million.
Providing some relief to investors, oil prices continued to ease, with Brent crude futures falling below $90 per barrel for the first time since August.
Market breadth remained negative, with declining stocks outnumbering advancing shares by 4.01 to 1 on the New York Stock Exchange and 2.63 to 1 on the Nasdaq.
The S&P 500 recorded four new 52-week highs and three new lows. Meanwhile, the Nasdaq Composite registered 23 new highs against 84 new lows.
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