Wall Street ends down as traders focus on Nvidia, Fed after last week’s rally

NEW YORK – Wall Street stocks ended lower on Aug 25 as investors parsed the outlook for US interest rates and looked ahead to artificial intelligence (AI) chipmaker Nvidia’s quarterly earnings this week while digesting a rally on Aug 22 that lifted the Dow Jones Industrial Average to a record high close.

On Aug 22, stocks jumped after US Federal Reserve chair Jerome Powell hinted at the Jackson Hole Symposium that an interest-rate cut could be considered at the central bank’s September meeting, citing recent labour market weakness.

“The market has a Jackson Hole hangover,” said Mr Jake Dollarhide, chief executive of Longbow Asset Management in Tulsa, Oklahoma. “Investors are taking a little bit of a breather.”

The Personal Consumption Expenditures Price Index – the Fed’s preferred inflation gauge – is due to be released on Aug 29, while official nonfarm payrolls data is expected next week. The reports will be crucial, especially after Mr Powell said a rate cut was not certain.

“The focus right now is the labour market,” said Mr Brian Klimke, investment director at Cetera Investment Management.

“We have the job market that’s rolling over a little bit and the economy is weakening, so the Fed needs to act sooner than later and they’re seeing it too.”

Nvidia climbed 1 per cent ahead of its quarterly report on Aug 20, which will be one of Wall Street’s most closely watched events of the week and a crucial test of the scorching AI trade.

With Nvidia making up about 8 per cent of the S&P 500, results of the world’s most valuable company affect vast numbers of Americans who use index investment funds to save for retirement.

“This is an incredibly important event from a market participant standpoint,” said Mr Michael Green, portfolio manager at Simplify Asset Management.

Mr Powell’s comments on Aug 22 nudged major brokerages to revise their expectations, with Barclays, BNP Paribas and Deutsche Bank currently seeing a 25-basis-point reduction in borrowing costs in September.

Traders now see an 84 per cent chance of a Fed rate cut in September, according to CME Group’s FedWatch tool. Remarks from policymakers John Williams and Lorie Logan later in the day will be scrutinised to see if they share Mr Powell’s policy outlook.

The S&P 500 declined 0.43 per cent to end the session at 6,439.32 points.

The Nasdaq declined 0.22 per cent to 21,449.29 points, while the Dow Jones Industrial Average declined 0.77 per cent to 45,282.47 points.

Nine of the 11 S&P 500 sector indexes dropped, led lower by consumer staples, down 1.62 per cent, followed by a 1.44 per cent loss in health care.

Aug 22’s optimism helped the blue-chip Dow close at a record high for the first time since December 2024, and the benchmark S&P 500 logged its strongest one-day gain since May.

On Aug 25, Jefferies became the latest brokerage to raise its year-end target for the S&P 500.

Beverage company Keurig Dr Pepper tumbled 11.5 per cent after saying it would buy JDE Peet’s for $18.4 billion in cash.

Furniture retailers RH and Wayfair each declined more than 5 per cent after US President Donald Trump said on Aug 22 his administration would investigate furniture import tariffs.

Intel fell 1 per cent after Mr Trump said the US government was taking a stake in the chipmaker. He also said he would make other deals similar to the one with Intel.

Volume on US exchanges was relatively light, with 14.2 billion shares traded, compared with an average of 17.1 billion shares over the previous 20 sessions.

Declining stocks outnumbered rising ones within the S&P 500 by a four-to-one ratio.

The S&P 500 posted 17 new highs and no new lows; the Nasdaq recorded 125 new highs and 39 new lows. REUTERS