Wall Street is set for a lower open on Wednesday as concerns arise over possible restrictions on sales of artificial intelligence (AI) chips to China. Investors are eagerly awaiting Federal Reserve Chairman Jerome Powell’s speech for information on the outlook for interest rates.
Chipmakers Nvidia and Advanced Micro Devices saw premarket declines of 3.5% and 3.2%, respectively, following reports that the Commerce Department could halt chip shipments to China as early as July. This development affected semiconductor stocks, including Intel, Marvell Technology, and Qualcomm, all of which saw drops of more than 1%.
Tuesday’s upbeat economic data boosted market sentiment, easing fears of an imminent recession, while increasing the likelihood of another interest rate hike by the Federal Reserve in the next month.
Market attention is currently focused on a panel discussion featuring key central bank officials, including Powell and European Central Bank President Christine Lagarde, at the ECB’s annual forum in Portugal. Powell’s comments are expected to reinforce a data-dependent approach to policymaking and shed light on potential interest rate adjustments.
Market participants have already factored in a 76.9% probability of a 25 basis point rate hike in July, which would lift rates to a range of 5.25%-5.50%. The central bank is expected to keep rates at this level until the end of 2023, according to CMEGroup’s Fedwatch tool.
Despite the recent sell-off sparked by Powell’s hawkish comments, the S&P 500, Nasdaq and Dow have all witnessed quarterly gains, driven by a rally in technology and growth stocks and optimism around the Federal Reserve’s future stance.
Investors are eagerly awaiting upcoming economic indicators, including the personal consumption expenditure (PCE) index, initial jobless claims data and the final first-quarter GDP reading, to assess the current state of the U.S. economy. Additionally, the release of the results of the Federal Reserve’s annual stress tests for large banks after the market close will have an impact on the banking sector.
As trading begins, the Dow e-minis are showing a marginal decline of 0.02%, while the S&P 500 e-minis are down 0.19% and the Nasdaq 100 e-minis are reporting a decline of 0.37%.
Boeing saw a 1.3% increase after announcing that around 90% of its 737 Max fleet in China had resumed commercial operations at the end of June.
On the other hand, General Mills saw a 5.4% decline as the packaged food maker forecast full-year earnings below analyst estimates, causing a hit to the company’s stock performance.
Also read: Meta’s strategic review under Mark Zuckerberg delivers results and drives growth and innovation