Stock-Market Rally Halts as Dow Drops 150 Points from Record Highs
Wall Street took a pause on Tuesday as the Dow Jones Industrial Average and the S&P 500 experienced slight declines after reaching multiple record highs last week. Investors were focused on new data regarding slipping consumer attitudes and awaited the release of a closely watched inflation gauge later in the week.
The S&P 500 was down 3 points, or less than 0.1%, to 5,066, while the Dow Jones Industrial Average slipped 155 points, or 0.4%, to 38,911. On the other hand, the Nasdaq Composite was up 15 points, or 0.1%, to 15,990. These small declines came after the three major benchmark indexes experienced a slight drop on Monday, with the S&P 500 and Dow industrials breaking their three-day winning streak after ending last week at record highs. The Nasdaq Composite, however, continued to flirt with its first record finish in over two years.
One of the key factors driving the market is the impressive performance of AI chipmaker Nvidia Corp., whose stunning results last week sparked a wave of record highs on Wall Street. However, according to Art Hogan, chief market strategist at B. Riley Wealth Management, the current market environment is more of a wait-and-see situation rather than a risk-on or risk-off scenario. Investors are cautiously observing economic data that will be released in the coming days, which may provide clarity on the timing of Federal Reserve interest-rate cuts.
In particular, all eyes are on the personal-consumption expenditures price index (PCE), which will be published before the market opens on Thursday. Any significant uptick in this gauge may eliminate any remaining hopes of a rate cut in May. Hogan stated that while Nvidia was the must-see TV last week, this week all attention is on the PCE numbers. Markets have already priced in the possibility of fewer interest-rate cuts after January’s consumer-price index exceeded expectations. It would take a substantial upside surprise to negatively impact markets. Traders have significantly reduced their bets on near-term rate cuts since the beginning of 2024, with the first cut now expected in June instead of March or May, according to the CME FedWatch Tool. As of Tuesday morning, the chance of at least a 25-basis-point rate cut by June was seen at 51.2%.
In terms of economic data, consumer confidence fell to 106.7 in February from January’s revised reading of 110.9, which was a six-month high. However, Sonu Varghese, global macro strategist at Carson Group, believes that this decline is just a slight bump in the upward trend that began in October. Varghese also noted that the labor market remains in a healthy place, despite some pickup in interest rates in January that may have curbed housing demand. The housing market continues to face challenges, as home prices in the 20 largest metro areas reached record highs in December, marking the 11th consecutive increase and highlighting the shortage of homes for sale. Additionally, U.S. orders for durable goods dropped by 6.1% in January, which was a deeper decline than expected.
In terms of company news, Viking Therapeutics Inc. shares soared 92.2% after the company announced positive results in a Phase 2 trial of a weight-loss drug to treat obesity and diabetes. Nearly nine out of ten patients on the treatment achieved at least a 10% weight loss, compared to only 4% on the placebo.
Shares of Macy’s Inc. were up 4.7% following an earnings beat and the announcement of a growth strategy that includes closing 150 stores. The CEO, Tony Spring, stated that this new approach challenges the status quo to create a more modern Macy’s.
Lowe’s Cos. Inc. shares rose by 2.3% after a quarterly report from the home improvement retailer. While the company beat profit expectations, it saw a drop in sales due to slowing do-it-yourself demand and adverse weather conditions in January. Its full-year outlook also disappointed analysts.
Overall, the stock-market rally has come to a halt as investors await new economic data and closely monitor the possibility of Federal Reserve interest-rate cuts. The market remains cautious but optimistic, with some companies experiencing positive news and others facing challenges.
