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U.S. Stocks Close Mixed Following Late-Day Recovery

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February 21 2024 11:57AM

Stocks spent most of Wednesday’s session in the red but staged a notable recovery attempt going into the close of trading. The Dow (DOWI:DJI) and the S&P 500 (SPI:SP500) bounced well off their worst levels and into positive territory, although the tech-heavy Nasdaq (NASDAQI:COMP) still closed lower for the third straight session.

While the Nasdaq fell 49.91 points or 0.3 percent to 15,580.90, the Dow inched up 48.44 points or 0.1 percent to 38,612.24 and the S&P 500 crept up 6.29 points or 0.1 percent to 4,981.80.

Concerns about the outlook for interest rates weighed on the markets for much of the session, with the major averages falling to their worst levels after the minutes of the Federal Reserve’s latest monetary policy meeting revealed most officials remain wary of cutting interest rates “too quickly.”

The minutes of the late-January meeting said participants acknowledged risks to achieving the Fed’s employment and inflation goals were moving into better balance, but they remained highly attentive to inflation risks.

“In particular, they saw upside risks to inflation as having diminished but noted that inflation was still above the Committee’s longer-run goal,” the Fed said.

Most participants subsequently highlighted the risks of moving “too quickly” to lower interest rates and emphasized the importance of carefully assessing incoming data in judging whether inflation is moving down sustainably to the Fed’s 2 percent target.

However, the Fed said a couple of participants pointed to downside risks to the economy associated with maintaining an overly restrictive stance for too long.

The late-day recovery may have reflected expectations the Fed will still eventually cut interest rates as well as optimism ahead of the release of fourth quarter results from Nvidia (NASDAQ:NVDA) after the close of today’s trading.

Shares of Nvidia have skyrocketed this year amid optimism about demand for its AI chips, but traders are wary of whether its results will support further upside.

“While equities have run out of steam in recent days, Nvidia’s results could be make or break time for markets,” said Danni Hewson, head of financial analysis at AJ Bell. “Elevated expectations mean the chip specialist has no room for error. It needs to smash it out of the park and show that the AI boom still has momentum.”

Ahead of the release of its quarterly results, Nvidia slumped by 2.9 percent after tumbling by 4.4 percent on Tuesday.

Sector News

Despite the late-day recovery by the broader markets, networking stocks continued to see substantial weakness, dragging the NYSE Arca Networking Index down by 3.0 percent to its lowest closing level in over two months.

Palto Alto Networks (NASDAQ:PANW) led the sector lower, with the cybersecurity company plummeting by 28.4 percent after reporting better than expected fiscal second quarter results but lowering its forecast for full-year revenue growth.

Computer hardware and software stocks also saw considerable weakness on the day, contributing to the lower closing by the tech-heavy Nasdaq.

Meanwhile, natural gas stocks skyrocketed along with the price of the commodity, resulting in a 2.8 percent surge by the NYSE Arca Natural Gas Index.

Oil producer, utilities and oil service stocks also moved notably higher, helping lift the markets well off their lows of the session.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance on Wednesday. Japan’s Nikkei 225 Index fell by 0.3 percent, while China’s Shanghai Composite Index jumped by 1.0 percent.

The major European markets also finished the day mixed. While the U.K.’s FTSE 100 Index slid by 0.7 percent, the French CAC 40 Index and the German DAX Index rose by 0.2 percent and 0.3 percent, respectively.

In the bond market, treasuries came under pressure after showing a lack of direction earlier in the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 5.0 basis points to 4.325 percent.

Looking Ahead

Trading on Thursday may be driven by reaction to Nvidia’s earnings, while reports on initial jobless claims and existing home sales are also likely to attract attention.