United States equities snapped a three-day winning streak on Tuesday (Wednesday AEST), retreating from record highs as weakness in artificial intelligence-linked stocks dragged major benchmarks lower, while caution from the Federal Reserve added to investor unease.
The S&P 500 fell 36.8 points, or 0.6%, to close at 6,656.9. The Dow Jones Industrial Average slipped 88.8 points, or 0.2%, to 46,292.8. The tech-heavy Nasdaq Composite dropped 215.5 points, or 1%, to finish at 22,573.5, with losses concentrated in large-cap AI names.
Nvidia, a key driver of the AI trade, lost 2.8% a day after announcing a US$100 billion investment in OpenAI that had temporarily lifted its shares and boosted broader equity markets.
Oracle, which had surged more than 50% in the past three months on hopes of robust AI-driven sales, declined 4.4%. Amazon, Microsoft and Meta also contributed to the tech sector’s retreat, falling 3%, 1%, and 1.3%, respectively.
Federal Reserve Chair Jerome Powell added to the cautious tone, warning that “equity prices are fairly highly valued” and stressing that the trajectory for interest rate cuts remains uncertain.
“It’s a challenging situation,” he said, noting that with near-term risks to inflation pointing to the upside, and risks to employment tilting to the downside, there is “no risk-free path”.
Investors are now turning their attention to Friday’s release of the personal consumption expenditures price index, the Fed’s preferred measure of inflation, which could provide fresh clues on monetary policy.
Meanwhile, political risks continued to simmer in Washington, with traders eyeing a possible government shutdown at the end of September.
The Senate last week rejected both Republican and Democratic proposals to temporarily fund the federal government.
On Tuesday, President Donald Trump cancelled a planned meeting with top congressional Democrats, stating that no discussion “could possibly be productive.”
