On August 29, 2023, the S&P 500 concluded the trading day down from its recent record highs, as notable declines were observed in major tech stocks, particularly Dell and Nvidia, which are heavily tied to the AI sector. Investors are currently analyzing inflation data that indicates tariffs are beginning to impact consumer prices. Zachary Hill, head of portfolio management at Horizon Investments in Charlotte, North Carolina, commented on the situation, stating, "Today is just weakness in the top of the market, in tech." He further expressed concerns regarding over-investment in AI and the challenges surrounding monetization opportunities.
According to the latest report from the Commerce Department, U.S. consumer spending saw its largest increase in four months during July, accompanied by a rise in services inflation. However, economists are skeptical that this uptick in domestic demand will deter the Federal Reserve from implementing interest rate cuts next month, particularly given the backdrop of a weakening labor market. The report also highlighted mild price pressures resulting from recent tariffs on imports.
The conclusion of a U.S. tariff exemption for package imports valued under $800 on Friday has raised operational costs for businesses, which are likely to be passed on to consumers. Traders are widely anticipating that the Fed will announce a 25 basis point cut in interest rates during its upcoming September meeting. Jim Smigiel, chief investment officer at SEI, noted that even with an expected rise in inflation, the Fed may view this as a temporary, tariff-related issue and might not react strongly.
With the U.S. stock market set to close on Monday for the Labor Day holiday, the anticipation of interest rate cuts has contributed to a positive trend for major indices. The S&P 500 and the blue-chip Dow have achieved their fourth consecutive month of gains, while the tech-heavy Nasdaq marked its fifth consecutive monthly rise. Notably, shares of Alibaba surged by 13% following the company's robust quarterly growth in its cloud computing segment, largely attributed to AI-driven demand.
At the end of the trading session, the S&P 500 declined by 0.64%, closing at 6,460.26 points, just a day after reaching a record-high close. The Nasdaq fell by 1.15%, finishing at 21,455.55 points, while the Dow Jones Industrial Average dipped 0.20% to 45,544.88 points. For the month, the S&P 500 increased by 1.9%, the Dow rose by 3.2%, and the Nasdaq added 1.6% to its value.
In recent comments, Fed Governor Christopher Waller, who is seen as a candidate for the Fed's leadership role, expressed a desire to initiate rate cuts next month, aligning with President Donald Trump's calls for lower borrowing costs. Additionally, a court hearing regarding Trump's attempt to dismiss Federal Reserve Governor Lisa Cook concluded without an immediate ruling, allowing her to remain in her position for the time being.
The S&P 500 noted 21 new highs and no new lows, while the Nasdaq recorded 76 new highs and 67 new lows during this trading session. Trading volume on U.S. exchanges was relatively subdued, with 14.8 billion shares exchanged, compared to the average of 16.4 billion shares over the preceding 20 sessions.
Reporting by Johann M Cherian and Sanchayaita Roy in Bengaluru, and by Noel Randewich in San Francisco; Editing by Devika Syamnath and Matthew Lewis. Our Standards: The Thomson Reuters Trust Principles.
