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US stocks fell after a Federal Reserve official warned that the central bank could raise interest rates again and remain higher for longer, offsetting enthusiasm about blockbuster earnings from chipmaker Nvidia.
The benchmark S&P 500 was down 1 per cent in Thursday afternoon in New York, having given up early gains. The tech-focused Nasdaq Composite fell 1.3 per cent.
Investors have turned their attention to the annual economic policy conference in Jackson Hole, Wyoming, where Boston Fed president Susan Collins said more rate increases may be needed to bring inflation down to the central bank’s 2 per cent target.
“I am not yet seeing the slowing that I think is going to be part of what we need for that sustainable trajectory to get back to 2 per cent [inflation] in a reasonable amount of time,” Collins told the Financial Times, later adding that “that resilience really does suggest we may have more to do”.
Investors will now turn their attention to Fed chair Jay Powell, who is scheduled to speak on Friday at the Jackson Hole symposium about the economic outlook at a pivotal moment in the central bank’s historic inflation-fighting campaign.
Yields on the policy-sensitive two-year US Treasuries rose 0.06 percentage points to 5.01 per cent, while yields on the benchmark 10-year notes added 0.03 percentage points to 4.23 per cent. Bond yields rise as prices fall.
The dollar, which tends to strengthen when investors expect higher rates, advanced 0.5 per cent against a basket of six peer currencies, to trade at its highest level since the start of June.
Economic data released on Thursday sent mixed, albeit mild, signals about the US economy, which has remained relatively resilient amid the Fed’s rate rises.
There were 230,000 new applications for US unemployment aid in the week to August 19, down from 240,000 the previous week, but still a relatively robust reading. Economists expected no change.
Separately, new orders for durable goods excluding defence and aircraft — a popular proxy for business investment — edged up 0.1 per cent in July.
Wells Fargo economists said, however, that “what matters for equipment spending and thus real GDP growth is non-defense capital goods shipments”, which fell 1.1 per cent in July, and “suggest a weak start to Q3 for equipment spending”.
US stock markets staged a broad sell-off, but the main indices were initially boosted by gains for Nvidia. The chipmaker reported on Thursday that its revenues had more than doubled in the latest quarter, outstripping already high analysts’ estimates. Its shares were up 2.5 per cent in the afternoon.
Demand for AI and chip-related stocks have tripled Nvidia’s market capitalisation since the start of the year, making it the first chipmaker to be valued at more than $1tn.
Its steadily rising share price also prompted a rally in US megacap tech stocks in the first half of the year, but enthusiasm has faltered in recent weeks on concern in part over whether higher interest rates may curb growth.
“This eagerly anticipated report was a lot more than just about Nvidia’s earnings,” said James Baxter, founder of Tideway Wealth. “It is being read as an insight into the impact of generative AI, where Nvidia technology leads the way, on the wider software and computing industry.”
Europe’s region-wide Stoxx Europe 600 finished 0.4 per cent lower and Germany’s Dax fell 0.7 per cent. The FTSE 100 bucked the trend, closing 0.2 per cent higher.
In Asia, Hong Kong’s Hang Seng index rose 2.1 per cent, China’s CSI 300 added 0.7 per cent, Japan’s Topix increased 0.4 per cent and South Korea’s Kospi gained 1.3 per cent.
