Nvidia, Economic Worries May Continue To Weigh On Wall Street

The major U.S. index futures are currently pointing to a lower open on Wednesday, with stocks likely to see further downside following the sell-off seen over the course of the previous session.

A continued decrease by shares of Nvidia (NASDAQ:NVDA) may weigh on Wall Street, as the AI darling is slumping by 1.6 percent in premarket trading after plummeting by 9.5 percent in Tuesday’s session.

The market leader remains under pressure after a report from Bloomberg said the U.S. Justice Department has sent subpoenas to Nvidia and other companies as it seeks evidence that the chipmaker violated antitrust laws.

Citing people familiar with the investigation, Bloomberg said the DOJ is now sending legally binding requests that oblige recipients to provide information after previously delivering questionnaires to companies.

Concerns about the outlook for the U.S. economy may also continue to weigh on the markets following yesterday’s disappointing readings on manufacturing activity.

Economic worries contributed to the sell-off by stocks in early August, and traders may be nervous the markets recovered too quickly amid the lingering possibility of a U.S. recession.

On the U.S. economic front, the Commerce Department released a report showing the U.S. trade deficit increased to its largest in over two years in the month of July.

Stocks moved sharply lower over the course of the trading day on Tuesday, with the major averages more than offsetting the strong gains posted last Friday. With the steep drop, the Dow pulled back well off the record closing high set in Friday’s session.

The major averages climbed off their worst levels going into the close but continued to post significant losses. The Nasdaq plunged 577.33 points or 3.3 percent to 17,136.30, the S&P 500 dove 119.47 points or 2.1 percent to 5,528.93 and the Dow tumbled 626.15 points or 1.5 percent to 40,936.93.

The sell-off on Wall Street came after the Institute for Supply Management released a report showing a continued contraction by U.S. manufacturing activity in the month of August.

The ISM said its manufacturing PMI inched up to 47.2 in August from 46.8 in July, but a reading below 50 still indicates contraction. Economists had expected the index to rise to 47.5.

The data led to renewed concerns about the economic outlook, which contributed to the sell-off seen in early August.

“Manufacturing employment shrank for the third consecutive month as manufacturing activity slowed in recent months,” said Jeffrey Roach, Chief Economist for LPL Financial.

He added, “Although the manufacturing sector holds a smaller portion of the macro economy now than in previous cycles, investors should still position themselves for a broader slowdown throughout the balance of this year.”

A separate report released by the Commerce Department unexpectedly showed a modest decrease by U.S. construction spending in the month of July.

The weakness on Wall Street also came as some traders look to cash in on the previous session’s gains amid lingering uncertainty about the outlook for interest rates.

The Federal Reserve is almost universally expected to lower rates at its next meeting later this month, but there is some disagreement about the pace of rate cuts.

According to CME Group’s FedWatch Tool, there is a 63.0 percent chance of a quarter point rate cut later this month and a 37.0 percent chance of a half point rate cut.

Monthly jobs data will be in focus later this week, with economists currently expecting employment to climb by 165,000 jobs in August after rising by 114,000 jobs in July.

The unemployment rate is expected to edge down to 4.2 percent in August after rising to 4.3 percent in July, reaching its highest level since October 2021.

Semiconductor stocks pulled back sharply after turning in a strong performance last Friday, resulting in a 7.8 percent nosedive by the Philadelphia Semiconductor Index.

Substantial weakness was also visible among steel stocks, as reflected by the 5.1 percent plunge by the NYSE Arca Steel Index.

U.S. Steel (NYSE:X) helped lead the sector lower, tumbling by 6.1 percent after Vice President Kamala Harris expressed opposition to the sale of the steel producer to Japan’s Nippon Steel.

Oil service stocks also saw significant weakness amid a steep drop by the price of crude oil, dragging the Philadelphia Oil Service Index down by 4.9 percent.

Gold, computer hardware and housing stocks also showed notable moves to the downside, while interest rate-sensitive utilities stocks were among the few groups to buck the downtrend.


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