U.S. stocks mostly edged lower on Wednesday as investors took profits in shares of Nvidia and other chipmakers, while they braced for producer price data on Thursday and further clues on inflation ahead of next week’s Federal Reserve meeting.
An index of semiconductors eased after recent strong gains. The index is up roughly 17% for the year to date.
Investors are looking ahead to a GTC developer conference from March 18-21 and any announcements related to artificial intelligence.
Intel shares fell, with Bloomberg reporting that the Pentagon had pulled out of a plan to spend as much as $2.5 billion on a chip grant to the company.
February U.S. producer price data due on Thursday could offer further insight into inflation.
“The last reading actually helped to underscore the hotter inflation trend. So this is going to be important,” said Quincy Krosby, chief global strategist at LPL Financial in Charlotte, North Carolina.
While the U.S. central bank is widely expected to leave interest rates unchanged during its meeting, traders see a 65% chance of the first rate cut coming in June, the CME FedWatch Tool showed.
U.S. retail sales data also is due on Thursday.
According to preliminary data, the S&P 500 lost 9.66 points, or 0.19%, to end at 5,165.33 points, while the Nasdaq Composite lost 85.18 points, or 0.52%, to 16,180.46. The Dow Jones Industrial Average rose 38.68 points, or 0.11%, to 39,046.98.
Tuesday’s slightly hotter-than-expected consumer price data failed to dampen hopes of rate cuts in the coming months.
Among other declining shares, Dollar Tree slumped after the discount store chain said it would close nearly 1,000 stores and posted a net loss in the previous quarter, hurt by an over-$1 billion goodwill impairment charge.
McDonald’s shares fell after its chief financial officer said the fast-food giant’s international sales could fall sequentially in the current quarter, pressured by the Middle East conflict and weak demand in China.
“Investors have gotten comfortable with the notion that it’s not about when the Fed will lower rates but rather by how much, and a delay - whether it happens in May like many were initially hoping or in September - ultimately doesn’t matter,” said Oliver Pursche, senior vice president and advisor for Wealthspire Advisors in Westport, Connecticut.
“It’s that they will and that a less restrictive environment is coming.”
Traders now see a 70% chance of the first rate cut coming in June, the CME FedWatch Tool showed, versus 71% ahead of the inflation report.
According to preliminary data, the S&P 500 gained 57.12 points, or 1.12%, to end at 5,175.06 points, while the Nasdaq Composite gained 244.80 points, or 1.53%, at 16,264.08. The Dow Jones Industrial Average rose 230.43 points, or 0.59%, to 39,000.09.
“If you look at economic data, it continues to be pretty strong,” Pursche added. “And from my perspective as a consumer, employee and investor, I’d rather have a strong economy and slightly elevated interest rates than a weak economy that requires stimulus.”
Producer price data is due later this week.
On the down side, shares of Boeing fell. Boeing told employees in a memo on Tuesday that it is adding weekly compliance checks for every 737 factory work area and additional audits of equipment to reduce quality problems.
The U.S. Federal Aviation Administration has curbed Boeing production following the mid-air panel blowout on a new Alaska Airlines 737 MAX 9 jet on Jan. 5.
Also, U.S. carriers warned that their plans to increase capacity were in doubt due to jet delivery delays from Boeing.
Investors are now pricing in 94 basis points of rate cuts this year, compared to around 150 basis points they had priced in early January, according to futures tied to the fed funds. So far, however, a resilient economy, better-than-expected earnings and confidence that the Fed will nevertheless cut rates several times before the year is up have supported stocks.
According to a Reuters survey of economists, the CPI likely increased 0.4% in February, with the annual increase in prices at 3.1%. The core CPI is also forecast advancing 0.3%, with the year-on-year increase slowing to 3.7% from 3.9% in January.