US: Wall Street tumbles as Nvidia slides, investors fret that Fed may slow rate cuts

WALL Street ended sharply lower on Thursday, with steep losses in Nvidia and other AI heavyweights, as investors scaled back expectations of interest rate cuts due to inflation worries and divisions among central bankers about the US economy’s health.

All three major US stock indexes posted their steepest daily percentage declines in over a month. The US government reopened after a record 43-day shutdown that had worried investors and disrupted the flow of economic data.

A growing number of Federal Reserve policymakers in recent days have signalled hesitation about further interest rate cuts, pushing financial market-based odds of a reduction in borrowing costs in December to near even.

Fed officials who spoke recently cited worries about inflation and signs of relative stability in the labour market after two US interest rate cuts this year.

“The fundamental question is, is tariff inflation transitory and a one-time deal? And whether it is or isn’t, that’s why some of the Fed governors don’t want to cut,” said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma. “It’s a risky bet either way, whether they cut or don’t cut.”

Shares fell for some of the US stock market’s strongest performers in recent years, as investors fretted about high valuations fueled by optimism about artificial intelligence.

Nvidia, the world’s most valuable company, dropped 3.6 per cent, Tesla fell 6.6 per cent and Broadcom declined 4.3 per cent.

“There’s a lot of uncertainties about the state of the economy. ... What we’re going through is a little bit of a correction in the market in the AI sector and we’re seeing market rotation,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

The S&P 500 declined 1.66 per cent to end the session at 6,737.49 points. The Nasdaq fell 2.29 per cent to 22,870.36 points, while the Dow Jones Industrial Average declined 1.65 per cent to 47,457.22 points.

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Nine of the 11 S&P 500 sector indexes declined, led lower by consumer discretionary, down 2.73 per cent, followed by a 2.37 per cent loss in information technology.

Reflecting Wall Street’s rotation away from tech stocks, the S&P 500 value index has gained about 1 per cent so far this week, while the growth index has dipped 0.6 per cent.

Walt Disney tumbled 7.8 per cent after the media giant signaled it was preparing for a potentially prolonged fight with YouTube TV over distribution of its cable channels. Cisco Systems rallied 4.6 per cent after raising full-year profit and revenue forecasts, betting on demand for its networking equipment.

On Tuesday and Wednesday, the Dow notched record high closes, benefiting from investors selling technology stocks and moving money into the health care sector.

Recently, data from payroll processor ADP showed private employers shed over 11,000 jobs a week through late October. Indeed Hiring Lab slides showed a 16 per cent drop in retail-related job postings in October from a year ago, pointing to continued weakness in the labour market.

Traders are pricing in about a 47 per cent chance of a 25-basis-point rate cut in December, lower than last week’s 70 per cent probability, according to CME Group’s FedWatch tool. APA Corp gained 3.3 per cent after a report that Spain’s Repsol is considering a reverse merger of its upstream unit with potential partners, including the energy producer.

Memory device maker Western Digital fell 5.4 per cent, Seagate lost over 7 per cent and SanDisk dropped almost 14 per cent after Japanese memory manufacturer Kioxia Holdings reported lower sales and profits.

Declining stocks outnumbered rising ones within the S&P 500 by a 2.8-to-one ratio.

The S&P 500 posted 17 new highs and seven new lows; the Nasdaq recorded 56 new highs and 230 new lows.

Volume on US exchanges was relatively heavy, with 20.8 billion shares traded, compared to an average of 20.3 billion shares over the previous 20 sessions. REUTERS