The tech sector was behind much of the market recovery from the April selloff, but investors have started to take stock of the elevated valuations, sending the S&P 500 and the Nasdaq to their worst day in more than two weeks yesterday.
Deepening concerns of government interference with companies, sources said the Trump administration was looking into taking equity stakes in chip companies in exchange for grants under the Chips Act – just weeks after signing unprecedented revenue-sharing deals with Nvidia and AMD.
Nvidia, Advanced Micro Devices and Intel were marginally lower in premarket trading. Nvidia is expected to report quarterly results on Aug 27.
“For now, this looks like a mild and possibly necessary correction after an extremely strong run for this space,” said AJ Bell’s head of financial analysis, Danni Hewson.
“Nvidia’s quarterly earnings next week now look even more crucial than they already were,” Hewson said.
A slew of earnings from big-box retailers are also in the spotlight now as investors seek a clearer picture on discretionary spending at a time when consumer sentiment has taken a hit from concerns around tariffs pushing up prices in the months ahead.
Lowe’s declined 1% a day after rival Home Depot missed expectations on quarterly results.
Estee Lauder fell 4.3%, while Target and TJX Companies were marginally lower ahead of their respective reports. Walmart’s results are due tomorrow.
At 5.37am, Dow E-minis were down 69 points, or 0.15%, S&P 500 E-minis were down 8.5 points, or 0.13%, and Nasdaq 100 E-minis were down 40.25 points, or 0.17%.
Minutes from the Fed’s July meeting, where interest rates were left unchanged, are expected at 2pm.
It could set the tone before the central bank’s highly anticipated conference in Jackson Hole, Wyoming, between Aug 21 and 23.
Chair Jerome Powell is expected to speak on Friday and his remarks will be scrutinised for any clues on monetary policy, even as investors price in a 25-basis-point interest rate cut in September, according to data compiled by LSEG.
Traders “remain wary that Powell could strike a more hawkish tone, emphasising tariff-driven inflation risks and pushing back against the degree of easing expected by the market,” said Bas Kooijman, CEO of DHF Capital SA.
Remarks from governor Christopher Waller and Atlanta Fed president Raphael Bostic are expected later in the day.
Recent economic data has suggested that the economy is yet to feel the full impact of tariffs and strategists expect the lingering uncertainty to temper market optimism, leaving the benchmark S&P 500 to potentially end the year just below current near-record levels.
On the trade front, the commerce department slapped 50% import levies on more than 400 “derivative” steel and aluminium products.