In a dynamic trading session, US benchmark equity indexes showed a mixed performance as investors processed remarks from Federal Reserve Governor Christopher Waller and the latest corporate earnings reports. The Nasdaq Composite decreased by 2.9%, landing at 17,978.8, while the S&P 500 slipped 1.4% to 5,588.6.
Conversely, the Dow Jones Industrial Average experienced a modest rise of 0.6%, closing at 41,181.7. Sector performances highlighted a stark contrast, with technology witnessing the sharpest decline, plummeting 3.9%, whereas consumer staples emerged as the leading gainers. Waller provided critical insights into the Federal Reserve's outlook, indicating that the Federal Open Market Committee is approaching a decision to lower its benchmark lending rate, supported by signs of easing inflation.
"The data over the past couple of months illustrates an economy expanding at a more moderate pace, with labor supply and demand seemingly in equilibrium and inflation retracting from earlier figures," Waller noted. He emphasized the belief that while a specific endpoint has not yet been reached, the timing for a reduction in the policy rate is drawing near. Adding to the conversation, Fed Chair Jerome Powell indicated that policymakers may not wait for inflation metrics to recede to 2% before contemplating interest rate cuts.
This affirmation suggests a proactive approach from the Fed as economic conditions evolve. In bond market activity, the US 10-year yield decreased one basis point to 4.16% intraday. Meanwhile, the two-year rate saw a slight uptick of one basis point to 4.45%. This movement reflects shifting expectations regarding future monetary policy. On the economic front, housing starts in the US recorded an unexpected increase last month, rebounding from May's upwardly adjusted figures, predominantly fueled by a surge in multi-family building projects, according to government data.
Moreover, mortgage applications displayed a rebound following two weeks of declines, with refinance activity reaching its highest level since August 2022, as indicated by the Mortgage Bankers Association. Turning to commodity markets, West Texas Intermediate crude oil rose by 2.4% to $82.70 a barrel, reflecting ongoing changes in the energy sector. In a notable shift within the markets, semiconductor stocks faced downward pressure following a report from Bloomberg News suggesting President Joe Biden is considering strict trade restrictions if chipmakers persist in granting China access to advanced semiconductor technologies.
This news severely impacted key players in the sector, with Nvidia ($NVDA) shares declining by 6.3%, ASML ($ASML) plummeting by 12%, the most significant drop on the Nasdaq, and Arm ($ARM) down by 9%. Advanced Micro Devices ($AMD) likewise experienced a downturn, shedding 8.4% and ranking among the worst performers on both the Nasdaq and S&P 500. In contrast, Elevance Health ($ELV) reported better-than-anticipated results for the second quarter, even as it faced a notable decline in Medicaid plan memberships.
CEO Gail Boudreaux conveyed confidence in maintaining the full-year earnings outlook, despite a 6.5% drop in the company's shares. Johnson & Johnson ($JNJ) stood out as the second-highest gainer on the Dow, climbing 3.8% after the healthcare conglomerate reported second-quarter results that surpassed analysts' projections.
However, the company did revise its full-year earnings forecast downwards to account for the implications of recent acquisitions. Looking ahead, Crown Castle ($CCI), Kinder Morgan ($KMI), and United Airlines ($UAL) are among the companies set to release their earnings results following Wednesday’s market close. Gold prices dipped by 0.3% to $2,459.90 per troy ounce, while silver faced a more significant decline of 3.5%, trading at $30.36 per ounce.
The shifts in commodity prices might reflect ongoing volatility in the market as investors continue to assess economic indicators. Overall, today's market movements underscore the intricate interplay between economic data, Federal Reserve policy signals, and sector-specific developments, providing a complex landscape for investors navigating the current investment environment..