Global Stocks Turn Cautious as Nasdaq Slides, Nikkei Declines, and Fed Outlook Weighs on Markets

Global markets were mixed Wednesday. Stocks Big tech shares sank on Wall Street, dragging the Nasdaq and S&P 500 lower, even as the Dow hovered near record levels. In Asia, sentiment soured and Japan’s Nikkei was off from recent highs, while regional action was mostly mixed ahead of major Fed signals and Nvidia’s results.

Tech Stocks Take a Hit

U.S. technology shares fell on Tuesday, leading the Nasdaq to drop 1.5% in its sharpest decline in weeks. The S&P 500 fell 0.6 percent as well, even after the Dow Jones Industrial Average reached an intraday record. Analysts described the shift as a reshuffling of the market rather than a response to significant new developments.

Worries about artificial intelligence (AI) weighed as well. Comments from OpenAI’s Sam Altman about inevitable “bubbles” in the field and research questioning AI’s profitability and job impact also dampened sentiment. The next earnings report from chipmaker NVIDIA is on deck, and investors are nervous about whether the recent AI-driven momentum is sustainable.

Attention Turns to the Federal Reserve

Attention has now shifted to the Federal Reserve’s Jackson Hole symposium later this week. Although some traders point to the Fed’s uncertainty as a driver of Tuesday’s volatility, pricing for a September rate cut remains steady, with markets showing more than an 80% chance of a quarter-point reduction.

U.S. housing data gave a conflicting view, mixed picture, with starts climbing in July but building permits slipping to their lowest in five years. Treasury yields stayed, and the dollar edged higher while investors awaited for the release of Fed meeting minutes.

Global Markets React

Weakness in technology stocks also spread overseas. The Japanese Nikkei fell by 1.5%, and the South Korean Kospi declined 0.7%. Chinese stocks, on the other hand, performed better as the Shanghai Composite leapt to its highest in more than a decade amid hopes of government stimulus and portfolio rebalancing.

European markets were somewhat muted after a short-lived lift on optimism about Ukraine talks. Inflation readings were mixed, with eurozone data meeting the forecasts and a hotter figure in the U.K. seen as warped by airfare costs. But European defense stocks dropped sharply.

Oil, Currencies, and Commodities
Oil prices slipped as markets weighed the potential for easing tensions in Ukraine that could avert a disruption of Russian crude exports. Brent fell 0.8% to $66.07 a barrel, and U.S. crude dropped 0.9% to $62.88.

The euro advanced modestly against the dollar, and the yen strengthened slightly. Gold rose 0.3%, to $3,339.54 an ounce, and was getting a safe-haven bid. Bitcoin and ether also fell, following the broader mood of risk.