[New York Stocks] S&P, Nasdaq Fall for Second Day as Tech Stocks Slide... FOMC: "Inflation Is the Greater Risk"

Semiconductor and Tech Stocks Fall on Investor Profit-Taking
Concerns Grow Over AI Investment Frenzy
FOMC Minutes: "Inflation Poses Greater Risk Than Employment"
All Eyes on Powell's Jackson Hole Speech on the 22nd

The three major U.S. stock indexes closed mixed on August 20 (local time) in New York. Amid profit-taking by investors, technology stocks-previously criticized as overvalued-declined for a second consecutive day, dragging down both the S&P 500 and Nasdaq indexes. Minutes from the July Federal Open Market Committee (FOMC) meeting, released the same day, confirmed that committee members believe it is premature to cut interest rates.

Reuters Yonhap News

On the New York Stock Exchange, the blue-chip Dow Jones Industrial Average closed at 44,938.31, up 16.04 points (0.04%) from the previous session. The large-cap S&P 500 fell by 15.59 points (0.24%) to 6,395.78, while the tech-heavy Nasdaq dropped 142.095 points (0.67%) to 21,172.857. The S&P 500 declined for a fourth straight session, and the Nasdaq fell for a second consecutive day.

Investors took profits from semiconductor and technology stocks, which had risen sharply in recent months. Doubts about whether the artificial intelligence (AI) boom can be sustained over the long term also fueled selling. By stock, Nvidia, a leading semiconductor company, fell 0.14%. AMD dropped 0.81%, and Broadcom declined 1.27%. Other technology stocks were also weak. Apple fell 1.97%, Microsoft and Alphabet (Google’s parent company) dropped 0.79% and 1.14%, respectively. Meta, Facebook’s parent company, lost 0.5%, and Tesla declined 1.64%.

Carol Schleif, chief investment officer at BMO Private Wealth, commented, “Technology stocks have shown a remarkable rally, rising more than 80% from their early April lows. It is not surprising that some investors are taking profits from technology stocks.” She added, “Trading volumes are generally low at the end of August, so price swings tend to be much larger than what fundamentals would suggest.”

Matt Maley, chief market strategist at Miller Tabak, said, “The recent decline in technology stocks may be nothing more than a mild correction similar to what we saw three weeks ago. To sound the alarm, we need to see if the downtrend continues further.”

The minutes of the July FOMC meeting, released in the afternoon, revealed that Federal Reserve (Fed) officials agreed that it is premature to cut interest rates. The minutes stated, “Participants highlighted both the upside risks to inflation and the downside risks to employment, but most judged the upside risks to inflation as the greater concern.” Regarding the impact of tariff policy on prices, several committee members pointed out that “significant uncertainties remain regarding the timing, magnitude, and persistence,” and warned that “if the effects of high tariffs persist, there is a greater risk that inflation expectations will become unanchored.” Previously, at the FOMC meeting held on July 30, the Fed decided to keep the benchmark interest rate unchanged at 4.25-4.5% per year.

However, the minutes also noted, “Some viewed downside risks to employment as the most important threat.” This appears to reflect the views of Fed Vice Chair Michelle Bowman and Fed Governor Christopher Waller, who voted against the decision to hold rates steady, advocating for a rate cut.

This FOMC release comes ahead of Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium, scheduled for 10 a.m. on August 22. Powell is expected to outline his outlook for the U.S. economy and the direction of monetary policy in this speech. The market is watching closely to see whether he will signal a rate cut or dampen expectations with hawkish (tightening) remarks. If he maintains a cautious stance on monetary easing, there is concern that the stock market downturn could intensify.

The White House continues to pressure for rate cuts. On this day, U.S. President Donald Trump called for the resignation of Fed Governor Lisa Cook, alleging that she obtained a mortgage loan through false statements.

Additionally, investors paid close attention to the earnings of major retailers. Target’s stock plummeted 6.33% after reporting a decline in second-quarter sales and announcing a new CEO. In contrast, Lowe’s rose 0.85% after posting results that beat market expectations, and TJX Companies gained 2.71% on strong earnings and an upward revision of its annual earnings per share (EPS) outlook.

U.S. Treasury yields were steady. The yield on the benchmark 10-year Treasury note, a global reference for bond rates, fell by 1 basis point (1bp = 0.01 percentage point) to 4.29% from the previous session, while the 2-year Treasury yield remained unchanged at 3.74%.