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After a brief two-day winning streak, the stock market faced a setback as it opened lower, influenced by mixed economic data and led by fluctuations in the tech sector, particularly those associated with artificial intelligence. In this environment of uncertainty, all 11 sectors of the S&P 500 index experienced declines.
The volatility in the market was reflected in the Cboe Volatility Index (VIX), which increased throughout the trading day, rising from 20.51 on Monday to a high of 22.57 before stabilizing at 21.83. A VIX reading above 20 is indicative of market anxiety and potential price swings.
Investor focus will center on Federal Reserve Chair Jerome Powell, who will be addressing the public at 2:30 PM Eastern Standard Time on Wednesday.
Federal Reserve Announcements Expected
Current predictions suggest a near certainty, around 99%, that the Federal Reserve will maintain its benchmark interest rate within the range of 4.25% to 4.50% following this week’s Federal Open Market Committee (FOMC) meeting.
Furthermore, projections regarding a potential rate cut in the upcoming May meeting have fluctuated significantly, dropping from 85.6% on February 18 to 61.6% by March 11, before climbing back up to approximately 77.7% yesterday, showing continued uncertainty surrounding monetary policy.
Nvidia’s CEO Jensen Huang attracted attention with his keynote speech during the GTC AI Conference. Prior to his address at 1 PM EST, Nvidia’s stock experienced notable volatility, dipping by as much as 4.2% before rallying by 3.2% shortly after.
At the close of trading, the Dow Jones Industrial Average fell by 0.6% to 41,581, while the S&P 500 declined 1.1% to 5,614, and the Nasdaq Composite dropped 1.7% to 17,504.
Insights from Jensen Huang
During his presentation, Nvidia’s stock momentarily peaked at $118.98 about 15 minutes into his talk before declining significantly to close down 3.4% at $115.43. Huang announced that Nvidia’s partners would be launching Blackwell Ultra products in the latter half of the year, which includes advanced AI servers aimed at enhancing their product offerings.
The new Nvidia GB300 NVL72 server promises a 1.5 times increase in AI performance compared to its predecessor, indicating a strong push for innovation in AI capabilities.
Additionally, Nvidia has joined forces with General Motors to advance technologies in self-driving vehicles and AI-driven robotics. The company also introduced Dynamo, a new open-source inference engine aimed at improving AI capabilities across the sector.
Highlighting the company’s success, Huang noted that Nvidia has successfully sold 3.6 million Blackwell GPUs this year to major firms including Amazon, Microsoft, Alphabet, and IBM. He observed that the growth in AI data centers has reached a crucial turning point, suggesting promising future trajectories for Nvidia.
Anticipated Remarks from Jerome Powell
Market participants are keenly anticipating Powell’s views on trade tariffs and economic policy. While he is expected to speak on these topics, the framing of these discussions will likely focus on the Fed’s dual objectives of maintaining stable prices and ensuring full employment.
Another significant point of interest is the future of quantitative tightening (QT). Current sentiments indicate that there is considerable uncertainty surrounding this policy, with differing opinions emerging from various members within the Fed. Some have proposed to pause or taper QT in light of recent market instabilities that could affect the Fed’s oversight of the federal funds rate.
Analyst Sonia Meskin from UBS anticipates the Fed may defer any decisions regarding QT until May or June to prevent market disruptions.
Meskin cautioned that any abrupt conclusion to QT might be perceived as a fundamental shift in Fed policy. This preparation would likely be communicated during upcoming meetings to mitigate market volatility.
Key Economic Data Among Market Influencers
Less frequently highlighted, the Import Price Index has garnered attention, especially given recent economic conditions. The Bureau of Labor Statistics reported a 0.4% increase in import prices for February, surpassing expectations.
Andrew Brenner, head of international fixed income at National Alliance Securities, noted that the rising import prices could lead to upward revisions in the Personal Consumption Expenditures (PCE) estimates, complicating the Fed’s ability to implement its traditional “Fed put” strategy, which aims to cut interest rates to stimulate growth.
Additionally, the Census Bureau reported a robust growth of 11.2% in housing starts in February, reaching a seasonally adjusted annual rate of 1.5 million, surpassing the expected figure of 1.39 million.
While building permits saw a slight decrease of 1.2%, the figures still exceeded estimates at approximately 1.46 million. Furthermore, the Federal Reserve Board announced that both industrial production and manufacturing output exceeded anticipations in February, marking a potential resilience in the economy.
While industrial production rose by 0.7%, contrasting with a predicted increase of 0.3%, manufacturing jumped by 0.9%, a noticeable improvement from January’s figures.
Source
www.kiplinger.com