Wall Street Closes Lower as US Inflation Data Exceeds Expectations

Wall Street closed slightly lower on Wednesday as US inflation data came in higher than expected. Many investors remained cautious ahead of Nvidia's earnings report, which is seen as a bellwether for the artificial intelligence sector.

The US Commerce Department announced that annual inflation rose 3.7% in the twelve months to July, slightly surpassing forecasts. Separate data indicated that the economy grew at a 1.5% pace in the second quarter. These figures raise new questions about the Federal Reserve's monetary policy, increasing the significance of upcoming economic announcements.

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It wasn't enough to shift the balance for the September meeting, but if the next data moves in the same direction, the Fed may be pressured to act.

Investors are now turning their attention to Fed Chair Kevin Warsh's speech in Jackson Hole on Friday. Ellen Zentner, chief economic strategy at Morgan Stanley Wealth Management, stated, "It wasn't enough to shift the balance for the September meeting, but if the next data moves in the same direction, the Fed may be pressured to act." The next scheduled Fed meeting is in September, a month traditionally considered weak for stocks, with the chances of an interest rate hike standing at 38.1%, according to the CME FedWatch tool.

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There is no crisis; the issue is more about the expectations and guidance that will come from the Fed and the Treasury. This increases uncertainty and, consequently, the risk premium.

Greg Tuorto, head of small and mid-cap investments at Goldman Sachs Asset Management, noted, "There is no crisis; the issue is more about the expectations and guidance that will come from the Fed and the Treasury. This increases uncertainty and, consequently, the risk premium." He emphasized, "On the other hand, the underlying economic environment remains strong. The earnings of companies we hold and some large-cap companies stand out."

The Dow Jones fell 113.52 points, or 0.21%, to 53,463.88. The S&P 500 lost 1.58 points, or 0.02%, to 7,675.70, and the Nasdaq declined 21.10 points, or 0.08%, to 26,130.20. Nvidia's shares dropped 1.6% ahead of its quarterly earnings report, with investors watching to see if the company will confirm the resilience of the AI market. Any results below expectations could reignite doubts about the sustainability of growth in the sector.

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On the other hand, the underlying economic environment remains strong. The earnings of companies we hold and some large-cap companies stand out.