Financial uncertainty arising from the Fed causes a lull on Wall Street
Wall Street witnessed a modest decline in the middle of the week, with investors preferring a cautious approach ahead of Nvidia's business report and outlook, which was scheduled to be released post-market close. According to traders, the semiconductor sector had the potential for disappointment, and the impact of export restrictions and tariffs on the medium-term forecasts was a point of concern. The Fed and the bond market also influenced the trading day, with the Dow-Jones Index closing 0.6 percent lower at 42,099 points, while the S&P-500 and Nasdaq Composite dropped 0.6 and 0.5 percent respectively.
In the context of Nvidia, the business report is crucial not just for the company but for the overall market. A positive report could revive investor optimism and shift focus towards the power of AI, while Washington's headlines about tariffs and taxes may take a backseat. The Nvidia stock, after showing extreme volatility following strong gains the previous day, fell by 0.5 percent.
The minutes of the US central bank's meeting, published in the evening, put pressure on stock prices, pushing them to their daily lows. Fed representatives expressed concerns about a possible increase in inflation due to President Trump's trade policies. Another event that caught the attention of investors was an auction of five-year US Treasury notes. Despite a strong demand for a two-year paper the day before, there was another test for the interest in US bonds, which had previously been affected by President Trump's unpredictable policy course. However, the current auction helped calm nerves, as it received solid demand, causing yields on the secondary market to fall from their daily highs. The yield on ten-year US Treasury notes rose by 5 basis points to 4.48 percent, just below the 4.5 percent level that had earlier caused unease.
Oil prices rose by up to 0.8 percent due to expectations of further sanctions against Russia. With no signs of genuine willingness for a ceasefire from the aggressor in the Ukraine war, indications grew that President Trump could lose patience and impose new sanctions, particularly in the oil sector. However, prices retreated significantly from their daily highs as the OPEC+ cartel was likely to decide on a production increase on Saturday.
Gold prices were slightly down due to rising US market interest rates and a strong dollar. Analyst Ole Hansen of Saxo Bank also mentioned a gradual downward trend, looking at the previous days.
General Motors shares fell 1.9 percent as the US automaker scrapped a significant investment in electric motor production and instead opted to pour a higher amount into the manufacturing of traditional V8 engines. On the other hand, Salesforce acquired cloud platform Informatica for $8 billion, while Stellantis shares dropped 3.1 percent after the automaker announced a successor to CEO Carlos Tavares, who will step down at the end of 2024.
Chevron was granted a license by the US administration to maintain its oil production in Venezuela. According to sources, the US oil company can now maintain crucial infrastructure in Venezuela but cannot import oil from the South American country.
Gamestop plummeted by 10.9 percent after the video game retailer's Bitcoin purchase was initially well-received. A profit warning spooked investors in department store chain Macy's, but its earnings results were better than expected, leading to a 0.5 percent drop. Abercrombie & Fitch jumped 14.7 percent, with the retailer reporting earnings above market expectations. Vail Resorts rose 8.8 percent, with former CEO Rob Katz returning to the post at the operator of ski resorts.
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Key points to remember:- Export restrictions and tariffs have significantly impacted Nvidia's financial performance and outlook, but the company remains resilient due to strong global demand for AI chips.- Nvidia reported a $4.5 billion charge in the first quarter of fiscal 2026 due to excess inventory of its H20 AI accelerator, a chip specifically developed for the Chinese market to comply with earlier export controls.- The company expects to lose about $8 billion in second-quarter revenue as a direct consequence of these restrictions.- Nvidia's market share in China has dropped from 95% four years ago to around 50% today.- Nvidia is still expected to maintain its dominance globally, particularly as demand for AI infrastructure remains robust outside China.- The ability to adapt products, manage risks, and drive innovation will be key to sustaining growth in the face of regulatory headwinds.
The Commission, with its expertise, has been consulted on the draft finance and investing plans for Nvidia's business, given its critical importance and the impact of export restrictions and tariffs on its financial performance. A positive report could not only revive optimism for Nvidia but also highlight the power of AI in the overall market.
In light of Nvidia's financial predicament due to trade policies and export restrictions, the potential for investing in AI infrastructure outside China remains robust, necessitating strategic adaptability, risk management, and continued innovation.
