NASDAQ 100, Dow Jones, S&P 500: Wall Street Wavers as Mild Inflation Meets Tech Tensions

Highlights

• Mild inflation data temporarily boosts Wall Street.
• Tech giants face valuation challenges amid rate concerns.
• Biden’s order intensifies U.S.-China trade tensions.

Wall Street Faces Mild Inflation & Economic Woes

Wall Street witnessed a turbulent Thursday. Initially boosted by milder-than-anticipated inflation data, main indexes turned flat as concerns about the U.S. economy’s extended outlook began to overshadow optimism. Investors began to speculate whether stocks still had the potential to surge.

Inflation’s Double-Edged Sword & Federal Reserve’s Stance

July’s inflation data indicated a 0.2% increase for both headline and core consumer prices. The annual rise was documented at 3.2% for the headline, and a sharper 4.7% for the core. At the day’s onset, this seemed to favor Wall Street, with all three primary benchmark indexes soaring by over 1%. The surge was attributed to expectations that the Federal Reserve might halt any more monetary tightening in 2023 and might even consider rate cuts by the next year. However, while the headline numbers appeared positive, traders soon noted the persistent nature of core inflation. This realization tempered the initial enthusiasm. Mary Daly, San Francisco Fed President, added to the cautious sentiment, emphasizing the need for further progress in inflation data.

Tech Stocks & Market Movement

Following a continuous five-month growth driven predominantly by tech giants, both the S&P 500 and the Nasdaq Composite experienced just their second positive day in August. However, these gains became profit-taking opportunities. The tech valuations, which are heavily influenced by rate fluctuations, were tested. Notably, leading tech companies such as Apple and Nvidia saw a minor decline in their stocks, while others like Alphabet remained steady. Any potential growth in these tech behemoths was further restricted by a rise in the 10-year U.S. Treasuries. Notably, its yield crossed 4% post a lackluster 30-year paper auction.

Stock Highlights & Trade Tensions

On the brighter side, Walt Disney shares spiked by 4.9%, surpassing Wall Street’s quarterly profit expectations. The fashion industry made headlines as Tapestry announced its acquisition of Michael Kors’ parent company, Capri, for a whopping $8.5 billion, sending Capri’s stock soaring by 55.7%. However, trade relations became tenser as President Joe Biden introduced an executive order restricting specific U.S. investments in sensitive Chinese technologies.

Forecast: Bullish or Bearish?

Despite mixed signals, the bear seems to be lurking closer than the bull for Wall Street. With increasing caution around inflation and tech valuations coupled with growing trade worries, the immediate future seems to lean slightly bearish. Investors and traders should tread with caution and keep a vigilant eye on upcoming economic data and geopolitical moves.