4/5/2024

Indices decline ahead of nonfarm report

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Key points:

  • All three major indexes (Dow Jones, S&P 500, Nasdaq Composite) fell more than 1%.
  • The S&P 500 posted its biggest one-day drop since February 13th.
  • Reason: comments from the Fed, which did not give confidence that rates would be cut soon.

The three major US stock indices showed significant declines. The Dow Jones Industrial Average fell 1.35%, the S&P 500 fell 1.23% and the Nasdaq Composite fell 1.4%. This marked the S&P 500’s biggest one-day drop since February 13.

The reason for the decline was comments from representatives of the Federal Reserve System, which did not give investors confidence that interest rates would be cut soon. Ahead of the publication of the monthly US employment report, which is expected on Friday, investors preferred to take a wait-and-see approach.

The Dow Jones lost 530.16 points to close at 38,596.98. The S&P 500 fell 64.28 points to 5,147.21. The Nasdaq Composite fell 228.38 points to finish the day at 16,049.08.

Fed comments and upcoming unemployment report

All sectors of the S&P 500 were in the red, with technology (.SPLRCT) falling 1.7% as the leading decliner.

Comments from Fed representatives had an impact on investor sentiment. Minneapolis Fed President Neel Kashkari said that while he previously predicted two rate cuts in 2024, slowing inflation may mean they are no longer necessary.

On Wednesday, Fed Chairman Jerome Powell and other Fed officials also expressed caution about cutting rates. Despite this, stocks rose following the release of higher-than-expected U.S. jobless claims data.

Friday’s employment data could provide more insight into the labor market. Economists forecast nonfarm payrolls will fall to 200,000 in March from 275,000 in February and the unemployment rate will remain steady at 3.9%.

Markets still expect a rate cut of at least 25 basis points in June with a probability of about 60%.

Nvidia and Alphabet are leaders in growth by market capitalization

Nvidia and Alphabet showed the largest gains in market capitalization in March 2024. This was driven by enthusiasm for artificial intelligence (AI) and anticipation of new products and expansion plans.

Nvidia’s market capitalization by the end of March grew by 14% compared to February, reaching $2.25 trillion. Alphabet increased its capitalization by 9%, to $1.8 trillion.

The growth in Nvidia shares was driven by the company’s announcement of the release of a new generation processor using AI at the end of 2024. Alphabet shares got a boost from reports of Apple’s interest in integrating Google’s Gemini AI engine into the iPhone.

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