Wall Street stocks pulled back from record highs on Wednesday as flaring tensions in the Middle East and rising crude prices stoked inflation jitters and convinced investors to take some profits. All three major U.S. stock indexes closed in negative territory, dragged lower by financials .SPSY and tech .SPLRCT, with the small-cap Russell 2000 .RUT underperforming its larger-cap counterparts. Chips .SOX advanced, indicating the artificial intelligence fervor is alive and well. Still, most of the Magnificent Seven group of AI-related megacaps were lower.
The S&P Software & Services index .SPLRCISdeclined. It has been battered in recent months by fears of AI disruption.Middle East hostilities intensified as the U.S. and Iran traded a new round of air strikes, the latest test of a shaky ceasefire. Oil prices rose, adding to worries that upward pressure on energy prices could metastasize into broader, systemic inflation.
Financial markets are pricing more than a 40% likelihood of a rate hike at the conclusion of the U.S. Federal Reserve’s December meeting, up from 9.1% one month ago, according to CME’s FedWatch tool. New York Fed President John Williams reiterated his position that the central bank does not need to change interest rates despite upside inflation risks, stating monetary policy is “in the right place.” Economic data suggested the labor market was stable, and the services sector continued to expand, but input prices remained elevated and corporate spending plans appeared soft amid rising energy costs and geopolitical uncertainties.
The Beige Book, the Fed’s regional economic survey, showed economic activity gathered steam in recent weeks, employment was little changed, but the fallout from higher energy prices due to the war was pervasive.
According to preliminary data, the S&P 500 .SPX .SPX lost 54.11 points, or 0.74%, to end at 7,555.67 points, while the Nasdaq Composite .IXIC .IXIC lost 230.97 points, or 0.85%, to 26,862.93. The Dow Jones Industrial Average .DJI .DJI fell 581.84 points, or 1.13%, to 50,725.95. Among chipmakers, Marvell MRVL.O MRVL.O , Intel INTC.O INTC.O , Qualcomm QCOM.O QCOM.O , and Sandisk SNDK.O SNDK.O outperformed.
Asset managers dropped after Switzerland’s Partners Group PGHN.S PGHN.S capped withdrawals from an $8.6 billion private equity fund. KKR KKR.N KKR.N , Blackstone BX.N BX.N , Blue Owl OWL.N OWL.N and Ares Management ARES.N ARES.N all lost ground. GameStop GME.N GME.N advanced after the original meme-stock posted a rise in quarterly revenue and unveiled a $2 billion share buyback program. Elon Musk’s SpaceX plans to price its IPO at $135 a share to raise a record $75 billion, a source familiar with the matter told Reuters on Tuesday. Broadcom AVGO.O AVGO.O results were expected shortly.
Reporting by Stephen Culp; Additional reporting by Medha Singh and Twesha Dikshit in Bengaluru; Editing by David Gregorio.
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