On Wednesday, the Dow Jones Industrial Average achieved a noteworthy milestone, closing at an all-time high of 41,198.1 as investors digested recent comments from Federal Reserve Governor Christopher Waller alongside the latest corporate earnings reports from various sectors. The Dow marked a gain of 0.6%, yet the Nasdaq Composite experienced a stark decline, dropping 2.8% to 17,996.9, while the S&P 500 faced a setback, falling 1.4% to 5,588.3.
Notably, the technology sector was hit the hardest, plummeting 3.7%, in contrast to consumer staples which led the market's gainers. Governor Waller remarked on the progress being made towards a potential reduction in interest rates, noting that the Federal Open Market Committee (FOMC) is 'getting closer' to making this pivotal decision.
He emphasized growing economic indicators showing a moderation in growth rates, a balance in labor supply against demand, and a calming inflationary trend, but he urged that the job is not yet complete. Waller articulated, "The data over the past couple months shows the economy growing at a more moderate pace, labor supply and demand apparently in balance, and inflation slowing from earlier this year.
While I don't believe we have reached our final destination, I do believe we are getting closer to the time when a cut in the policy rate is warranted." In correlation with these statements, Fed Chair Jerome Powell indicated that the central bank would not delay the decision to lower rates until inflation hits the 2% target, further hinting at a more flexible approach. In the bond market, the US 10-year yield declined by one basis point, settling at 4.16%, while the two-year rate remained nearly unchanged at 4.44%. Turning to company-specific news, shares of Johnson & Johnson ($JNJ) surged by 3.7%, placing it among the top gainers on the Dow following the company’s impressive second-quarter performance that surpassed expectations.
Despite this optimistic showing, Johnson & Johnson adjusted its full-year earnings forecast downward to account for recent acquisitions. Elevance Health ($ELV), meanwhile, experienced a decline of 5.8% in its stock price despite reporting stronger-than-anticipated second-quarter results. The company faced challenges with a drop in Medicaid memberships, yet CEO Gail Boudreaux confirmed that the overall earnings outlook for the year remained intact. Furthermore, semiconductor stocks were under pressure following news from Bloomberg indicating that President Joe Biden is contemplating substantial trade restrictions on chipmakers if they continue providing China with access to cutting-edge semiconductor technology.
Notably, Nvidia ($NVDA) shares fell by 6.6%, ASML ($ASML) declined nearly 13%, marking the Nasdaq's steepest drop, while Advanced Micro Devices ($AMD) decreased by 10%, joining Applied Materials ($AMAT) among the worst performers on both the Nasdaq and S&P 500. In the commodities sector, West Texas Intermediate crude oil rose 2.7% to $82.95 per barrel, following a report from the Energy Information Administration that indicated a larger-than-anticipated decrease in US commercial crude stockpiles. Economic analyses reveal that activity across most districts increased at a 'slight to modest' rate since May, although the Federal Reserve's latest Beige Book suggests a forecasted slowdown in growth over the next six months due to ongoing inflation concerns and the forthcoming presidential election. Additionally, US housing starts unexpectedly increased last month, reflecting growth from May's upwardly adjusted figures, driven by a rise in multi-family building projects, according to government statistics.
US industrial production also exceeded expectations last month, attributed to a less-than-anticipated deceleration in manufacturing output as reported by the Fed. In a sign of recovery, mortgage applications in the US rebounded after witnessing two consecutive weeks of declines, largely influenced by a peak in refinancing activity—the highest level recorded since August 2022—amid declining interest rates, as noted by the Mortgage Bankers Association. Notably, gold prices dipped 0.3%, settling at $2,461.60 per troy ounce, while silver saw a 3% decline, reaching $30.51 per ounce..