U.S. stocks ended slightly lower on Wednesday after the personal consumption expenditures (PCE) index showed that inflation remains elevated, while some investors waited for semiconductor giant NVIDIA’s earnings later in the day.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) slid 0.2%, or 113.52 points, to finish at 53,463.88 points, snapping its third-day winning streak.
The S&P 500 ended mostly flat, losing just 0.02%, or 1.58 points, to end at 7,675.70 points. Healthcare and consumer discretionary stocks were the worst performers.
The Health Care Select Sector SPDR (XLV) lost 1%. The Consumer Discretionary Select Sector SPDR (XLY) fell 0.7%. Six of the 11 sectors of the benchmark index ended in negative territory.
The tech-heavy Nasdaq slid 0.1%, or 21.10 points, to close at 26,130.20 points.
The fear gauge, the CBOE Volatility Index (VIX), was up 1.55% to 15.21. Decliners outnumbered advancers on the NYSE by a 1.16-to-1 ratio. On the Nasdaq, a 1.38-to-1 ratio favored declining issues. A total of 14.2 billion shares were traded on Wednesday, lower than the last 20-session average of 16.2 billion.
On the NYSE, there were 144 new highs and 66 new lows. On the Nasdaq, there were 68 new 52-week highs and 75 new lows. On the S&P 500, there were 11 new 52-week highs and three new lows.
Inflation Reading Dents Consumer Sentiment
Investors’ confidence was further hit on Wednesday after the PCE price index, a key inflation metric for the Federal Reserve, came in hotter than expected. PCE index rose 0.2% sequentially in July, taking the annual inflation rate to 3.7%. Both the annual and monthly readings came in higher than analysts’ expectations.
Core PCE, which strips out volatile food and energy, also rose 0.2% sequentially in July. Year over year, core PCE rose 3.3%. Both monthly and annual readings came in line with expectations.
The last print shows that inflation remains sharply above the Federal Reserve’s target. The central bank’s next policy meeting is scheduled for September, and if inflation stays elevated, a rate hike is likely. Markets are pricing in a 38.1% chance of a rate hike in September, according to the CME FedWatch tool.
Meanwhile, bond yields remained mostly unchanged on Wednesday, after falling sharply in the previous session. The 10-year Treasury yield fell 8 basis points in the earlier session. Bond yields jumped to historic highs last week, with the 10-year Treasury yield hitting a 20-year high.
All Eyes on NVIDIA
Several investors took a wait-and-watch stance on Wednesday as they awaited quarterly results from NVIDIA Corporation (NVDA) later in the day. Shares of the AI darling declined 1.6% on Wednesday. NVIDIA has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
