NEW YORK: Wall Street’s main indexes dropped on Wednesday as investors awaited the Federal Reserve’s monetary policy verdict against the backdrop of an 8 percent jump in oil prices, while chip stocks remained under pressure ahead of Big Tech earnings.
The benchmark S&P 500 hit its lowest level in a month, while the tech-heavy Nasdaq was at a three-month low, dropping over 9 percent from its June record high.
Chip stocks such as industry leader Nvidia fell 2.3 percent and Micron lost 4.6 percent, sending the Philadelphia Semiconductor index down 3.6 percent to a more than two-month low.
Industrials slid 2.5 percent and led declines on the S&P 500, with AI infrastructure company Vertiv down 13.2 percent after missing quarterly revenue expectations.
Quarterly results from Microsoft and Meta are due after the bell, while Amazon.com and Apple are expected later this week. Traders will closely watch for signs that their billion-dollar AI investments are boosting earnings enough to meet their lofty expectations.
Shares of the companies edged lower in early trade, except for Microsoft, which added 0.3 percent.
Global markets have been volatile this month as investors questioned the sustainability of the AI spending boom after signs that major US companies were deepening a web of AI-linked investments and continuing to funnel billions into the technology at the expense of free cash flow.
The scrutiny comes as competition from China heats up, both in the race to develop advanced chips and as Chinese firms roll out cheaper AI models. On Wednesday, South Korean chipmaker SK Hynix’s bumper quarterly results fell short of lofty investor expectations. US-listed shares of the company dipped 1 percent.
At 11:39 a.m. ET, the Dow Jones Industrial Average fell 829.00 points, or 1.57 percent, to 51,918.32, the S&P 500 lost 62.98 points, or 0.85 percent, to 7,365.80 and the Nasdaq Composite lost 281.06 points, or 1.13 percent, to 24,595.85.
Recently, tech concerns have prompted investors to focus on other areas of the market such as consumer staples and healthcare, which were up 0.5 percent and 0.4 percent, respectively, on Wednesday.
The Fed will announce its monetary policy verdict at 2:00 p.m. ET amid crude prices soaring to USD89.94 a barrel, as US President Donald Trump said that the US would respond to Iran’s attacks in Jordan.
Traders see a 39.9 percent chance of a rate hike, according to LSEG data, after price pressures eased in the prior month. However, they are confident that rates will rise by at least 25 basis points by year-end.
Markets will scrutinize Chairman Kevin Warsh’s comments after he said the central bank would avoid giving explicit guidance on future interest-rate moves.
Declining issues outnumbered advancers by a 2.22-to-1 ratio on the NYSE and by a 2.32-to-1 ratio on the Nasdaq.
The S&P 500 posted 27 new 52-week highs and two new lows, while the Nasdaq Composite recorded 92 new highs and 143 new lows.
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