In a week marked by volatility, the S&P 500 and Nasdaq closed in negative territory as Federal Reserve officials’ remarks dampened hopes of an imminent end to aggressive interest rate increases. Concerns about additional rate hikes took center stage, but were overshadowed by promising economic data indicating a decline in inflation.
Traders on Wall Street were closely monitoring the comments from Federal Reserve officials, which hinted at the possibility of a pause in December rate hikes or even rate cuts. Christopher Waller, a Fed governor, expressed concern over core inflation not decreasing as anticipated, adding to the uncertainty surrounding the future direction of interest rates.
Contrasting Waller’s stance, Thomas Barkin, president of the Richmond Fed, expressed confidence in future rate increases. These divergent views from key policymakers only added to the market’s apprehension, contributing to the downward pressure on stocks.
Meanwhile, recent data on inflation provided some relief for investors. In June, the near-term inflation expectations of American consumers reached a two-year low. This brought a glimmer of optimism to the market, as fears of runaway inflation were somewhat assuaged.
Technology giants Microsoft and Amazon weighed on the S&P 500, with their respective declines of 1.7% and 1.5%. Investors grew cautious as the sector faced headwinds amidst concerns of increased regulatory scrutiny and lingering supply chain disruptions.
On a positive note, Nvidia Corp saw a slight uptick in its stock price as Morgan Stanley raised its price target for the company. The stock rose 0.1% in response to the upward revision, offering a glimmer of hope for investors in the semiconductor sector.
Looking ahead, U.S. stock markets will be closed on Monday in observance of the Juneteenth holiday, giving traders a breather amid the recent turbulence. Market participants will likely take this time to reassess their positions and evaluate the impact of the Federal Reserve’s comments on their investment strategies.