Quiver Quantitative - On Wednesday, Wall Street witnessed a decline in stock values, predominantly spurred by the apprehensions of persistent inflation and the prospective continuation of high interest rates, intensified by unexpected developments in the services sector. A significant contributor to the plummet was a slump in shares of tech giant, Apple Inc (NASDAQ:AAPL)., reacting to China's new policy banning the use of iPhones by central government officials. The Institute for Supply Management (ISM) revealed an unanticipated rise in its non-manufacturing Purchasing Managers' Index, escalating to 54.5 last month, surpassing the expected 52.5. Concurrently, the price metric reflecting the expenditure by service-sector businesses on inputs soared, evoking a reaction in the traders’ expectations concerning the Federal Reserve's stance on interest rate alterations, as evidenced by the CME FedWatch Tool.
Carol Schleif of BMO (TSX:BMO) Family Office critically noted investors' inability to adeptly interpret post-pandemic economic cues, as reflected in the stronger-than-predicted ISM services data. Despite the prevailing hope for imminent rate cuts, the data evidently underscores a resilient economy coupled with a stubborn inflation rate that isn't diminishing as swiftly as anticipated for the Federal Reserve to initiate rate reductions in the near term. Boston Fed President, Susan Collins, emphasized the necessity for prudent deliberations on forthcoming monetary policy decisions, echoing the sentiments of cautious advancement in the financial sector.
Highlighting the specifics of the market's behavior, the Dow Jones Industrial Average plummeted by 0.68%, settling at 34,406.42 points, while the S&P 500 decreased by 0.89% amounting to 4,456.74 points. Furthermore, the Nasdaq Composite experienced a significant dip, losing 1.28% of its value, equivalent to 179.32 points, reducing to 13,841.63. The technology sector bore the brunt of the decline, with a notable 1.6% drop, while defensive utilities managed a marginal 0.1% increase. The pronounced decline in Apple's stock value, by 3.7%, was a result of China's recent directive prohibiting the utilization of foreign-branded devices, including iPhones, by central government officials. Other influential companies, such as Tesla (NASDAQ:TSLA), Amazon (NASDAQ:AMZN), and Nvidia, also faced depreciations ranging from 1.6% to 3.8%, further influenced by escalating yields in U.S. Treasuries following the release of the economic data.
In the midst of this, the Federal Reserve's "Beige Book" unveiled a moderate growth in the U.S. economy in the preceding weeks, with a subdued job growth and a decelerated inflation rate in most regions. However, an increasing trajectory in oil prices ignited concerns of sustained inflationary pressures, urging the Federal Reserve to retain its vigilant approach towards interest rates. Furthermore, Lockheed Martin (NYSE:LMT) saw a significant 4.5% drop in shares following the revision of its delivery forecast for F-35 jets. Meanwhile, Roku Inc. experienced a 1.9% surge after announcing a workforce reduction by approximately 10%, alongside a restriction on new recruitments. The prevailing market trends reflected a predominance of declining issues, outpacing the advancing ones on both the NYSE and Nasdaq.
This article was originally published on Quiver Quantitative