Wall Street today: Tech-heavy Nasdaq drags US stocks ahead of Nvidia earnings; AI chip stocks down 3%, US dollar rallies

Wall Street's main indexes traded lower on Wednesday, August 28, ahead of Nvidia's earnings, with the tech-heavy Nasdaq leading declines, as focus was squarely on if the recent bull market rally that was led by the artificial intelligence (AI) chip firm and other tech-related shares can be sustained.

The three main indexes have swung between small gains and losses this week, with the Dow benchmark drifting near a record high and the S&P 500 within one per cent of an all-time peak as investors await Nvidia's results after the closing bell. The chip designer's shares were down 2.5 per cent. 

Also Read: Warren Buffet’s Berkshire Hathaway becomes first non-tech firm to hit $1 trillion in market value, stock up 30% YTD

Any disappointment in Nvidia's results could hurt megacaps and other semiconductor stocks, which have led to 2024's rally on the prospect of artificial intelligence integration boosting corporate profits. Other chip stocks such as Broadcom and Advanced Micro Devices fell 1.7 per cent and 2.9 per cent, respectively, with the Philadelphia SE Semiconductor index down 1.9 per cent.

All the growth stocks were in the red, with Meta down 0.7 per cent, Microsoft lower by 1.1 per cent and Alphabet declining 1.3 per cent. At 11:49 a.m. ET, the Dow Jones Industrial Average was down 137.89 points, or 0.33 per cent, at 41,112.61, the S&P 500 was down 35.66 points, or 0.63 per cent, at 5,590.14, and the Nasdaq Composite was down 214.22 points, or 1.21 per cent, at 17,540.60.

Also Read: Gold declines on strong US dollar, focus shifts to inflation data; silver down 2.3%

US stocks today

Six of the 11 S&P 500 sectors were lower, led by a 1.5 per cent drop in technology stocks. However, bank stocks rose more than one per cent, with Wells Fargo and Bank of America up over one per cent each.

Optimism continued to prevail that the US Federal Reserve will lower interest rates at its September meeting after Fed Chair Jerome Powell's support for imminent policy adjustment last week that had sparked broad-based market gains. Wall Street bets have placed odds of a 25-basis point reduction currently stand at 63.5 per cent, while those of a 50-bps cut are at 36.5 per cent.

Super Micro Computer tumbled 24.8 per cent after the AI server maker said it would delay the filing of its annual report for the fiscal year ended June 30, a day after Hindenburg Research disclosed a short position in the company.

The market value of billionaire Warren Buffett's Berkshire Hathaway surpassed $1 trillion, with the conglomerate's class B shares rising 0.8 per cent. Berkshire's rally this year has outpaced the S&P 500’s gains, with the company off to one of its best annual starts in a decade. 

The stock has rallied 30 per cent in 2024 on strong insurance results and economic growth optimism, while the market benchmark is up 18 per cent so far. It has added more than $200 billion in market capitalization this year alone—a record for the firm but a sharp contrast to Nvidia’s nearly $2 trillion increase. 

US dollar rallies on month-end buying

The US dollar rebounded on Wednesday due to month-end buying after recent declines that pushed it to its weakest in more than a year, as traders awaited economic data that could determine the pace of the US Federal Reserve's imminent easing cycle.

Also Read: US Fed rate cut bets, AI scope boosts IT outlook; Cyient, Persistent Systems, Mphasis among top mid-cap picks

Sharp bouts of volatility hit the foreign exchange markets this month as worries around a potential US recession and hawkish signals from the Bank of Japan (BOJ) hammered the dollar and sent other major currencies soaring.

The dollar index, which measures the greenback against a basket of six major currencies, rose 0.4 per cent to 100.99, on pace for its largest daily percentage gain since mid-June. Against the yen, the dollar rose 0.3 per cent to 144.45 yen, moving away from Monday's three-week low.

The euro slid 0.5 per cent to $1.1132, still within reach of the 13-month peak touched at the start of the week. Sterling dipped 0.3 per cent to $1.3223, after hitting its highest since March 2022 on Tuesday as traders bet that the Bank of England will go slower on monetary policy easing than the Fed.