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Global stocks mostly fall ahead of central bank gathering
Traders have spent most of August fretting that the Fed will be forced to raise interest rates further to contain inflation owing to a string of reports pointing to a resilient US economy and jobs market.
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Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, US, on June 22, 2023. (Reuters/Brendan McDermid)
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all Street stocks fell on Thursday as markets braced themselves ahead of a major speech by United States Federal Reserve chair Jerome Powell as a rally fueled by artificial intelligence (AI) star Nvidia fizzled.
Major US indices failed to extend Wednesday's rally, turning negative soon after the opening bell and progressively selling off further.
The yield on the 10-year US Treasury note advanced as markets steeled themselves for Powell's Jackson Hole, Wyoming, speech with memories of his 2022 hawkish commentary that sent stocks sputtering.
There's "a fair bit of trepidation about what Jay Powell is trying to get across," said Art Hogan of B. Riley Wealth Management.
All three major indices dropped, with the S&P 500 losing 1.4 percent.
Meanwhile stellar earnings by Nvidia, the major supplier of processors for AI, initially boosted sentiment regarding the wider tech sector, but gains quickly evaporated on the tech-heavy Nasdaq.
Traders have spent most of August fretting that the Fed will be forced to raise interest rates further to contain inflation owing to a string of reports pointing to a resilient US economy and jobs market, while the Bank of England and European Central Bank (ECB) are also tipped to raise rates again.
Bond yields have risen in anticipation, increasing borrowing costs for companies and consumers, and stock prices have slid in consequence.
This trend took a breather on Wednesday when a drop in yields bolstered US markets.
Positive sentiment continuing into Asian trading on Thursday. But Europe turned mostly lower in afternoon trading, and Wall Street also quickly slipped into the red. London stocks bucked the trend thanks to a weak pound.
On Thursday, first-time claims for unemployment benefits came in lower than analysts forecasted, while orders for durable goods declined from June to July.
The data comes as Powell and ECB head Christine Lagarde prepare to make speeches at Jackson Hole gathering on Friday.
Meanwhile the boost to sentiment from the strong performance of Nvidia, whose products play a crucial role in AI systems, failed to durably pull up other tech stocks.
The Silicon Valley-based company said after markets closed on Wednesday that sales doubled year-on-year to US$13.5 billion in the latest completed quarter, leaving a net profit of $6.2 billion, an eye-watering 843 percent higher than a year before.
Signaling that the boom in AI is still going strong, Nvidia said revenue in the current quarter would ramp up further to $16 billion.
Nvidia's stock rose as much as 10 percent following the results in after-hours trading but finished up just 0.1 percent.
Other large tech names suffered big declines. Amazon, Google parent Alphabet and Apple all dropped more than 2 percent in an indication that investors saw Wednesday's brief surge as an opportunity to take profits.
