On Wednesday, the S&P 500 Index closed down 1.52%, marking a one-month low, while the Dow Jones Industrial Average fell 2.19%, and the Nasdaq 100 dropped 2.06%, reaching a three-month low. September E-mini S&P futures and September E-mini Nasdaq futures also fell by 1.59% and 2.23%, respectively. The downturn was largely driven by a sell-off in chipmakers and AI infrastructure stocks amid heightened geopolitical risks, as crude oil surged over 6% following a missile attack by Iran on a U.S. base in Jordan.
The Federal Open Market Committee (FOMC) announced it would keep interest rates unchanged at 3.50% to 3.75% in a 9-3 vote. The decision was accompanied by concerns over inflation, with the 10-year Treasury note yield rising to 4.64% after the Fed’s hawkish stance. MBA mortgage applications also declined by 6.4% in the week ending July 24, and the average 30-year fixed mortgage rate increased to 6.76%, the highest in 11.5 months.
Key earnings reports are anticipated this week from major tech companies, including Microsoft and Meta Platforms, as analysts forecast a 23% increase in Q2 earnings for the S&P 500, primarily driven by AI spending. The market is currently pricing in a 56% chance of a 25 basis point rate hike at the next FOMC meeting scheduled for September 15-16.
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