All three major U.S. equity indexes opened higher Wednesday on continuing hope for a relatively sustainable peace in the Middle East.
Technology could carry stocks only so far, though, amid a flow of murky economic data and mixed earnings commentary.
The Nasdaq Composite crossed above the 20,000 level early in the trading session, the S&P 500 remains within hailing distance of a new all-time high and the Dow Jones Industrial Average is straddling its own big, round number.
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But Fed Chair Jerome Powell’s second day of congressional testimony underscored the uncertainty of the domestic as well as the global environment.
“One of the reasons this is so challenging,” Powell said about President Donald Trump’s tariffs, “is that there isn’t a modern precedent and we have to be humble about our estimates. Transmission into inflation may be more than we think or less than we think, which is why we want to take our time.”
By the closing bell, the Dow Jones Industrial Average was off 0.3% at 42,982 and the S&P 500 had shed a fraction of a point at 6,092, but the Nasdaq Composite held on for a 0.3% gain to 19,973.
Action in the energy patch
Crude oil got a bump from a catalyst other than potential pressure on the global supply chain stemming from the Israel-Iran conflict and closed higher by 1.3% – rising along with expectations the Federal Reserve will act sooner rather than later and cut interest rates.
The FOMC is still not likely to act at the next Fed meeting – but the probability of 25-basis-point reduction to the target range for the federal funds rate ticked up to 26.9% from 18.6% Tuesday and 12.5% a week ago.
September remains the odds-on favorite for the Fed’s next move, perhaps only because there is no meeting in August, when our central bankers will gather with other luminaries of economics and finance for the annual Jackson Hole Symposium.
Meanwhile, BP (BP) was up as much as 9.5% on a report from The Wall Street Journal that the oil and gas producer is in early-stage talks to be acquired by Shell (SHEL). The energy stock closed up 1.7%.
Shell denied the WSJ report. SHEL stock closed down 1%.
FDX and NVDA
Charles Dow created his first stock market index, the Dow Jones Railroad Average, in 1884, to provide a big-picture view of the U.S. economy. The precursor of the Dow Jones Industrial Average included 11 stocks, mostly railroads – the companies that were moving the goods.
There is a separate Dow Jones Transportation Average now, and it includes companies such as FedEx (FDX) that reflect progress, modernity and the way goods as well as services are transacted these days.
FDX stock slumped 3.3% Wednesday after management reported better-than-expected fiscal fourth-quarter results but provided worse-than-expected fiscal first-quarter guidance and opted not to share full-year earnings guidance.
Nominally a technology stock and renowned as the leader of the AI revolution, what does Nvidia (NVDA) provide but the means to transact in a 21st-century economy? Semiconductors, in other words, are the new railroads.
NVDA stock surged 4.3% Wednesday and hit a new all-time intraday high on growing confidence big AI infrastructure spenders Alphabet (GOOGL), Amazon.com (AMZN), Meta Platforms (META) and Microsoft (MSFT) will keep up their capex commitments.
It’s hard out there to be a new homeowner
The Census Bureau said sales of new single-family homes declined by 13.7% to a seasonally-adjusted annualized rate of 623,000 in May, well below expectations for a more modest decline.
“Following a jump in April,” write Wells Fargo economists Jackie Benson and Ali Hajibeigi, “a move up in financing costs slowed new home sales in May.”
Benson and Hajibeigi note a 3.2% year-over-year decline in transactions, “reflecting mounting headwinds to new home demand” including persistently high mortgage rates.