Tensions in financial markets are rising as investors try to balance optimism surrounding the tech recovery with the risks posed by tighter monetary policies and increased global regulatory scrutiny.
Tech pullback hits major indexes
Wall Street’s main indexes declined on Wednesday and the Nasdaq hit a two-week low as a rally in technology stocks cooled and caution prevailed ahead of the Federal Reserve’s highly anticipated Jackson Hole symposium later this week.
After driving much of the market’s recovery from the April selloff, tech stocks are pulling back as investors reassess high valuations in the sector. The S&P 500 technology index .SPLRCT slid 1.7% on the day. Deepening concerns of government interference with companies, sources said the Trump administration was looking into taking equity stakes in chip companies such as Intel in exchange for grants under the CHIPS Act – just weeks after unprecedented revenue-sharing deals with Nvidia and AMD.
Nvidia NVDA.O slid 2.8% and Advanced Micro Devices AMD.O lost 3%, while Intel INTC.O and Micron MU.O fell about 6% each. Nvidia’s quarterly results on Aug. 27 are keenly awaited for clues on demand for artificial intelligence. Other megacap growth names such as Apple AAPL.N and Meta META.O also came under pressure, falling 1.4% and 2.3%, respectively.
“To see a little pullback here after a big move up is perfectly normal and healthy. If the selling gets worse then you’ll see a rotation out of tech and into undervalued areas of the market like biotech or healthcare stocks or small-cap stocks.” said Adam Sarhan, chief executive of 50 Park Investments in New York.
Fed minutes and investor caution
At 10:04 a.m. ET, the Dow Jones Industrial Average .DJI fell 17.55 points, or 0.04%, to 44,904.72, the S&P 500 .SPX lost 39.62 points, or 0.62%, to 6,371.75 and the Nasdaq Composite .IXIC lost 272.45 points, or 1.28%, to 21,042.50.
The S&P 500 and the Nasdaq marked their worst session in over two weeks on Tuesday following a similar tech selloff. Minutes from the Fed’s July meeting, where interest rates were left unchanged, are expected at 2:00 p.m. ET. It could set the tone before the central bank’s annual conference in Jackson Hole, Wyoming, between August 21 and 23.
Chair Jerome Powell is expected to speak on Friday and his remarks will be scrutinized for insight on monetary policy, even as investors price in a 25-basis-point interest rate cut in September, according to data compiled by LSEG. Remarks from Governor Christopher Waller and Atlanta Fed President Raphael Bostic are expected later in the day. Investors also monitored allegations that Fed Governor Lisa Cook was involved in mortgage fraud.
Geopolitical risks and regulatory pressure
In addition to internal tensions linked to US monetary policy, investors are also reacting to the external environment. London’s recent announcement of new sanctions targeting the cryptocurrency network operated by Russia demonstrates that geopolitics and regulatory tightening are shaping global capital flows. These measures directly affect emerging sectors like crypto and also fuel a climate of caution among investors who are already more sensitive to signs of instability.
Market sentiment ahead of Jackson Hole
The approaching Jackson Hole symposium keeps investors on high alert.Expectations surrounding Jerome Powell’s remarks focus on signs of the Fed’s willingness to ease its stance without compromising financial stability.
The intersection of regulatory risks, geopolitical concerns, and US monetary policy creates a fragile environment in which the market remains highly dependent on signals from central authorities. As investors await the next steps in Jackson Hole, the perception is growing that the combination of international surveillance and Fed adjustments will determine the trajectory of technology stocks and, ultimately, the direction of global confidence.
GCN.com/Reuters