TOKYO – Stocks on Wall Street closed lower Wednesday as a pullback in big technology companies outweighed gains elsewhere in the market.
The S&P 500 fell 0.6%, weighed down by drops in Nvidia, Apple, Microsoft and Amazon. About 56% of the stocks in the benchmark index finished in the red. Tech sector stocks include many companies with outsized values that tend to lean more heavily on the index.
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The Dow Jones Industrial Average, which was coming off two consecutive all-time highs, fell 0.4%. The Nasdaq composite, which is heavily weighted with technology stocks, closed 1.1% lower.
The selling came ahead of an eagerly anticipated earnings report from the semiconductor company Nvidia, whose chips power AI applications. The company is one of the most influential stocks on Wall Street, with a total market value topping $3 trillion.
Nvidia reported its second-quarter results late Wednesday. Its earnings and revenue topped Wall Street's forecasts, but the stock fell 3.7% in after-hours trading. The shares fell 2.1% during the regular session. They're still up 153% for the year.
The chipmaker is one of several companies that have ridden a wave of enthusiasm over artificial intelligence developments and have been responsible for much of the broader market’s big gains over the last year.
The market’s pullback ahead of Nvidia’s quarterly results may have been partly due to news about another company tied to AI, Super Micro Computer.
The server technology company's stock sank 19.1% for the biggest decline among S&P 500 stocks after the company said it was delaying the filing of its annual report.
“The Super Micro story I think has people on edge because they’re so directly linked to the AI theme,” said Ross Mayfield, investment strategist at Baird.
Investors also reviewed a mixed batch of earnings and corporate financial updates from other companies Wednesday. Nordstrom rose 4.2% after beating analysts' earnings expectations and raising its financial forecasts for the year. Rival Kohl's rose 0.3% after also beating analysts' earnings expectations.
PVH, which owns the Calvin Klein and Tommy Hilfiger brands, fell 6.4% after giving investors a revenue forecast short of analysts’ expectations. Food producer J.M. Smucker fell 4.9% after trimming its earnings forecast for the year.
All told, the S&P 500 fell 33.62 points to 5,592.18. The Dow fell 159.08 points to 41,091.42. The Nasdaq fell 198.79 points to 17,556.03.
The latest results from retailers and others come as Wall Street and the Federal Reserve try to gauge the resiliency of U.S. consumers amid the squeeze from inflation and high borrowing rates. The latest updates from clothing retailers, food producers and others can help shed more light on how and where people are spending money.
Investors are also looking ahead to Friday, when the U.S. government releases its latest data on inflation with the PCE, or personal consumption and expenditures report, for July. The hope is that the data shows inflation easing further — or at least stagnating — so that Fed officials remain comfortable cutting interest rates at their September meeting as they've strongly suggested they would.
Economists expect the PCE, which is the Fed's preferred measure of inflation, to show that inflation edged up to 2.6% in July from 2.5% in June. It was as high as 7.1% in the middle of 2022. The rate of inflation has been easing steadily back toward the central bank's target of 2% since then, following the Fed's aggressive interest rate hikes.
Traders expect the central bank to begin trimming its benchmark interest rate back from a two-decade high at its next meeting in September, with cuts totaling up to 1% by the end of the year.
The expectations for those interest rate cuts follow reports on retail sales, employment and consumer confidence that show the economy continues to remain strong. That has helped build confidence that the Fed will accomplish its goal of taming inflation without stalling the economy into a recession.
“Economic fundamentals continue to point to sustainable disinflation," said Gregory Daco, chief economist at EY.
Treasury yields were mixed in the bond market. The yield on the 10-year Treasury rose to 3.84% from 3.83% on Tuesday.
Investor Warren Buffett’s Berkshire Hathaway unloaded more of its Bank of America stake, selling nearly 25 million shares worth almost $1 billion over the past week. Berkshire Hathaway's Class A stock, already the most expensive stock on Wall Street, gained enough ground to elevate the conglomerate into the club of companies valued by the stock market at over $1 trillion. It's the only company outside of the technology-related “Magnificent Seven” with that distinction.
Berkshire's Class A shares rose $5,152.03, or 0.7%, to close at $696,502.02.
Elsewhere, markets were mostly lower in Europe and mixed in Asia.
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Yuri Kageyama and Matt Ott and Josh Funk contributed.