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US stocks are under pressure to decline as a result of the negative mood that pervaded the markets on Thursday after the most recent US data releases and the ongoing effects of the FOMC minutes from Wednesday, which included a strong recommendation for the central bank to keep raising interest rates to record highs—the highest level in 23 years.
FOMC meeting minutes revealed that “many participants expressed their willingness to return to quantitative tightening of monetary policy in the event that risks of rising inflation emerge in one way or another, as long as this measure is appropriate.”
The participants also believed that “maintaining the interest rate at current levels in this meeting was supported by the data that released since the previous meeting, which shed light on the continuation of strong economic growth.”
Members of the Federal Open Market Committee expressed optimism about the future growth prospects, despite the expectations echoed by some of them that growth may show modest performance in the coming period.
The Fed added: “It will take longer than expected for us to have greater confidence in a decline in inflation,” stressing that many members of the Federal Open Market Committee showed a state of uncertainty about the current amount of monetary policy tightening.
The Dow Jones Industrial Average fell to 39,061 points after losing about 612 points, or 1.6%. The Standard & Poor’s 500 Index also fell to 5,267 points after losing about 40 points, or 0.8%, and the Nasdaq Heavy Technology Industries Index followed the same path, losing about 65 points, or 0.4%, settling at 16,739 points.
H1
It appears that US stocks still need strong catalysts in order to continue the remarkable gains they have achieved since early 2024, and despite operating amid concerns about rising interest rates, the S&P 500 index rose more than 10% in the first quarter, which contributed to achieve a total return of nearly 30% over the past 12 months, big technology stocks, especially those benefiting from the AI boom, led the trend.
Additionally, value stocks participated in the rally. However, the bond market faced headwinds due to the possibility of a postponement of interest rate cuts by the Federal Reserve.
Have Nvidia’s profits provided needed catalyst?
NVIDIA’s profits were affected by high demand for high-performance graphics and computing processors, which are used in a variety of industries such as gaming, artificial intelligence, mining, and self-driving vehicles, and although the company’s results were announced, the three stock indices needed a stronger push, so they declined instead.
NVIDIA’s profits were expected to continue to grow in the second quarter of 2024, thanks to continued demand for its products and expansion into new areas. The technology sector and artificial intelligence are key areas supporting the company’s earnings growth.
On the other hand, out of 40 analysts covering Nvidia shares, 35 recommended a “strong buy,” only two recommended a “moderate buy,” and three recommended a “hold,” indicating a potential upside of less than 7% from current prices. NVIDIA stock today is at $1,036.00, down $1.99, or -0.19%.
Economic trends
Investors initially expected a soft landing for the US economy, to avoid a recession, with expectations of a rate cut starting in March, which did not happen. However, the economy performed better than expected, and concerns remained about the possibility of a rebound in inflation. As a result, the rate cut was postponed with the focus on Expectations are now on three cuts at best and the stock market has remained resilient despite the prevailing uncertainty.
H1: performance by sector
Technology: Technology stocks outperformed, driven by companies ready to benefit from AI developments.
Value stocks: The financial services and energy sectors led the return of value stocks in the first quarter of 2024.
Bond Market: Bond performance has been affected by the Federal Reserve’s delay in cutting interest rates.
The first half of 2024 saw remarkable gains in the stock market, especially in the technology and value sectors. While economic trends remain favorable, investors must remain vigilant and consider the opportunities that appear in the markets and act on them at the appropriate time.
