NEW YORK — On Tuesday, U.S. stock indices experienced a slight decline as investors braced for an important inflation report scheduled for release on Wednesday.
The S&P 500 fell by 0.3%, marking its second consecutive day of losses following a recent peak. This dip is notable as it represents the first back-to-back losses for the index in almost a month, bringing a halt to its soaring momentum after an impressive rally that has positioned it for one of the strongest yearly performances in the last two decades.
The Dow Jones Industrial Average saw a decrease of 154 points, equivalent to 0.3%, while the Nasdaq composite also recorded a similar decline of 0.3%.
Oracle Corporation notably impacted market performance, as its stock plummeted by 6.7% after its recent quarterly growth figures fell slightly short of analysts’ projections. Despite this drop, Oracle’s CEO Safra Catz reported a record surge in demand associated with artificial intelligence technology for its cloud infrastructure offerings, which play a pivotal role in training generative AI models.
The AI sector has been a driving force behind significant growth for numerous companies, greatly influencing their stock values. Prior to Tuesday, Oracle’s shares had surged over 80% this year, leading to heightened expectations for its quarterly earnings report.
In the bond market, Treasury yields inched upward as anticipation builds around Wednesday’s inflation report, which is expected to reflect similar trends to the previous month’s data. This update, along with another report due on Thursday concerning wholesale inflation, will provide critical information for the Federal Reserve prior to its upcoming meeting, where a third interest rate cut for the year is widely anticipated based on investor sentiment.
The Fed has initiated a reduction of its primary interest rate from a two-decade high starting in September in an effort to alleviate pressure on a slowing job market while nearly achieving its 2% inflation target. While lower interest rates may bolster economic activity, they could simultaneously exacerbate inflationary pressures.
The prospect of a series of interest rate reductions extending into next year has contributed significantly to the record-setting performance of the S&P 500 this year.
Market sentiment in the options sector suggests that traders do not foresee substantial fluctuations in U.S. stock prices following the upcoming inflation report, according to analysts at Barclays. However, any report that diverges significantly from expectations could rapidly alter this outlook.
The yield for the 10-year Treasury increased to 4.22% from 4.20% observed late Monday.
Despite the Fed’s interest rate cuts, mortgage rates have remained stubbornly high and subject to volatility since autumn, which has adversely affected the housing market. Shares of homebuilder Toll Brothers dropped 6.9%, even after reporting profits and revenues that exceeded analysts’ expectations for the latest quarter.
Toll Brothers CEO Douglas Yearley Jr. highlighted strong demand since the beginning of the fiscal year six weeks ago, offering optimism as the company approaches the spring selling season in mid-January.
In other developments on Wall Street, Alaska Air Group’s stock surged by 13.2% following its increased profit forecast for the current quarter, attributed to higher-than-expected demand for air travel during the holiday season. The airline also announced a stock buyback plan of up to $1 billion alongside new service routes from Seattle to Tokyo and Seoul.
Boeing’s shares increased by 4.5% as the company announced it would resume production of the highly popular 737 Max model, after a seven-week strike by 33,000 workers that concluded in early November.
Meanwhile, Vail Resorts saw a 2.5% increase in its stock value after reporting a smaller-than-anticipated first-quarter loss, typically a challenging period for the ski resort operator.
Overall, the S&P 500 decreased by 17.94 points, closing at 6,034.91. The Dow closed down 154.10 points at 44,247.83, while the Nasdaq composite fell by 49.45 points to settle at 19,687.24.
Across global markets, mixed results emerged in China following the revelation that its exports grew less than anticipated in November. While Shanghai’s indices rose by 0.6%, those in Hong Kong declined by 0.5%.
In Europe, indices generally fell as anticipation builds for an upcoming European Central Bank meeting, where another interest rate cut is widely expected.
