After the release of minutes of the Federal Open Market Committee meeting, traders and investors began to feel sour on Wednesday afternoon.
News Analysis
After a brief rally the previous week, US stocks were sold again last week, led by a small cap, amid new signs of rising inflation and slowing consumer spending. Investor disappointment over the Fed’s conservative monetary policy outlook and concerns over Nvidia’s revenue next week added to sales pressure.
The S&P 500 ended at 6,013 on February 21, falling 1.67% in a week. The Dow Jones fell 2.87% at 43,428. Nasdaq finished the week at 19,524, a 2.11% drop. And the small cap Russell 2000 ended at 2,195, down 3.80%.
The short week’s deal started on the positive side as Apple unveils the iPhone 16E and Microsoft unveils a new quantum computer chip that can speed up the development of this quantum computer. These announcements have added momentum to the tech sector.
Potential policy changes include tariffs that act like sales taxes, increasing the costs of foreign products. Immigration policies include massive deportation, reduced labor supply and increased wages.
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Both contribute to inflation as producers and sellers pass all or part of these costs to consumers through price increases that raise inflation and interest rates.
However, shares did not begin until Thursday morning. Because traders and investors had enough time to read between the FOMC lines and realised that lower prices would not help stocks continue to rally at their current valuations.
Sales pressures accelerated on Friday as Wall Street got more news and increased news that the US economy was moving in a slower direction of higher inflation and economic growth.
The unexpected swing in the services sector, which accounts for almost two-thirds of the US economy, was led by a near stagnation of new orders. Companies cited political uncertainty and worsening growth in the new order over spending reductions.
These cuts are not good news for businesses relying on new government contracts to boost the top line. For example, the Trump administration reported that it was considering a 10% cut in defense spending over the week, prompting the sale of defense-related stocks, including High Farie Parantir.
Still, another factor added to Wall Street anxiety: Nvidia’s revenue release next week. AI chip makers have a tradition of defeating market expectations and promoting technology gatherings. However, there is always an opportunity for negative surprise when expectations are high and the ratings leave little room for disappointment.
