Fed Minutes Lead To Further Downside On Wall Street

After moving mostly lower early in Wednesday’s session, stocks have seen further downside following the release of the minutes of the Federal Reserve’s latest monetary policy meeting. The tech-heavy Nasdaq continues to lead the way higher.

Currently, the major averages are just off their lows of the session. The Nasdaq is down 148.40 points or 1.0 percent at 15,482.39, the S&P 500 is down 20.24 points or 0.4 percent at 4,955.27 and the Dow is down 128.01 points or 0.3 percent at 38,435.79.

The major averages fell to new lows after the minutes of the Fed’s latest monetary policy meeting revealed most officials remain wary of cutting interest rates “too quickly.”

The minutes of the late-January meeting said participants acknowledged risks to achieving the Fed’s employment and inflation goals were moving into better balance, but they remained highly attentive to inflation risks.

“In particular, they saw upside risks to inflation as having diminished but noted that inflation was still above the Committee’s longer-run goal,” the Fed said.

Most participants subsequently highlighted the risks of moving “too quickly” to lower interest rates and emphasized the importance of carefully assessing incoming data in judging whether inflation is moving down sustainably to the Fed’s 2 percent target.

However, the Fed said a couple of participants pointed to downside risks to the economy associated with maintaining an overly restrictive stance for too long.

Traders also remain on edge ahead of the release of fourth quarter results from Nvidia (NVDA) after the close of today’s trading.

Shares of Nvidia have skyrocketed this year amid optimism about demand for its AI chips, but traders are wary of whether its results will support further upside.

“While equities have run out of steam in recent days, Nvidia’s results could be make or break time for markets,” said Danni Hewson, head of financial analysis at AJ Bell. “Elevated expectations mean the chip specialist has no room for error. It needs to smash it out of the park and show that the AI boom still has momentum.”

Ahead of the release of its quarterly results, Nvidia is slumping by 3.7 percent after tumbling by 4.4 percent on Tuesday.

Sector News

Networking stocks continue to see substantial weakness on the day, with the NYSE Arca Networking Index plunging by 3.2 percent to its lowest intraday level in over two months.

Palto Alto Networks (PANW) has led the sector lower, plummeting by 27.7 percent after reporting better than expected fiscal second quarter results but lowering its forecast for full-year revenue growth.

Computer hardware, software and semiconductor stocks are also seeing considerable weakness, contributing to the steep drop by the tech-heavy Nasdaq.

Significant weakness has also emerged among airline stocks, as reflected by the 1.3 percent loss being posted by the NYSE Arca Airline Index.

On the other hand, natural gas stocks have moved sharply higher as prices of the commodity skyrocket, driving the NYSE Arca Natural Gas Index up by 2.6 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance on Wednesday. Japan’s Nikkei 225 Index fell by 0.3 percent, while China’s Shanghai Composite Index jumped by 1.0 percent.

The major European markets also finished the day mixed. While the U.K.’s FTSE 100 Index slid by 0.7 percent, the French CAC 40 Index and the German DAX Index rose by 0.2 percent and 0.3 percent, respectively.

In the bond market, treasuries have come under pressure after showing a lack of direction earlier in the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 4.2 basis points at 4.317 percent.