On Wednesday, U.S. stocks experienced their worst day since 2022, with the Nasdaq falling 3.6% and the S&P 500 dropping 2.3%. The tech-heavy sell-off was led by companies heavily invested in artificial intelligence, including Tesla and Alphabet. Tesla reported a decrease in auto revenues and delays in their robotaxi rollout, while Alphabet signaled that the benefits of AI investments would take time to materialize. This prompted traders to sell off stocks that had seen significant growth in recent months.
Other major tech companies such as Nvidia, Meta, Microsoft, and Amazon also experienced losses. Despite the sell-off, major stock indices remain up for the year, with the S&P 500 up 13.8%, the Nasdaq up 15.5%, and the Dow up 5.7%. The market decline comes amidst expectations for an interest-rate cut from the Federal Reserve due to a slowing economy.
Former Federal Reserve Bank of New York President Bill Dudley suggested that a rate cut may be necessary at the Fed’s upcoming meeting. While the stock sell-off was not indicative of broader economic conditions, signs of a slowdown, such as rising unemployment rates and increased consumer borrowing stress, are becoming more apparent.
Economists anticipate weaker economic growth in the latter half of 2024 and early 2025. Despite the sell-off, overall gains in the stock market for the year remain positive.
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