Wall Street began the week with a cautious sentiment, as a selloff in chipmakers, particularly Nvidia Corp., overshadowed a decline in oil prices. Nvidia's shares fell for a seventh consecutive session, their longest slump since 2022, ahead of its upcoming earnings report. The semiconductor sector was rattled by reports of AI-related price hikes exceeding 15% for some of Nvidia's largest customers, leading to a 5.9% slip in an ETF tracking memory shares and a 1% loss for the Nasdaq 100. This follows a growing concern that AI adoption might have peaked, impacting the demand reassessment for 'pick-and-shovel' providers in the AI trade.
Treasury Secretary Scott Bessent's plan to isolate Iran from the global economy, dubbed an "economic D-Day," contributed to oil settling near $85 a barrel, with West Texas Intermediate crude falling 2.4% to $84.98. The decline in energy costs offered some relief to bond yields, with the yield on 10-year Treasuries decreasing four basis points to 4.70%. Bessent also surprised the market with plans to boost buybacks of longer-dated bonds, refraining from further signals on U.S. debt management, after reports of his department drawing down cash to repurchase higher-yielding older securities.
Investors are keenly awaiting Federal Reserve Chair Kevin Warsh's speech on Friday at the annual gathering in Jackson Hole, Wyoming, for clarity on the central bank's reaction to persistent inflation. Analysts like Chris Larkin of E*Trade from Morgan Stanley and Anthony Saglimbene of Ameriprise highlight the importance of Warsh's speech for understanding the Fed's future direction. Other significant market events include Alibaba Group Holding Ltd. raising HK$80 billion ($10.2 billion) in a follow-on offering for AI investments, SoftBank Group Corp. planning a record ¥1 trillion ($6.3 billion) retail bond sale, and SpaceX's Elon Musk projecting the launch of AI satellites powered by Nvidia chips in late 2027.
By the end of the trading day, the S&P 500 fell 0.3%, the Nasdaq 100 lost 1%, while the Dow Jones Industrial Average rose 0.3%. The Bloomberg Dollar Spot Index increased 0.2%, and Bitcoin saw a rise of 1.7% to $78,695.51. The market sentiment is heavily influenced by the interplay of economic sanctions on Iran, the Treasury's efforts to manage long-term yields, upcoming tech earnings, and the Federal Reserve's stance on inflation.
