The US markets opened lower on Wednesday as investors gauged the sustainability of AI trade and the risks of a Fed rate hike later this year.
The benchmark indices started the second half of the year on a cautious note after a strong rally in the first half.
The NASDAQ 100 plunged over 400 points at the open, followed by a 0.6% drop in the S&P500 and a 0.5% fall in the Dow Jones. The US stock markets had a stellar rally in the first half as the tech-heavy NASDAQ 100 surged over 12%, the Dow Jones rose, and the S&P 500 rose nearly 9%.
The Wednesday fall is largely triggered by strong private sector jobs data reported by ADP, indicating a resilient state of the economy, underscoring the probabilities of a rate hike in the second half of the year. Additionally, Investors and traders will closely monitor the outcome of the latest round of talks held between the US and Iran in Doha, Qatar.
Meanwhile, the chip stocks stood as the key laggards on Wednesday, as a hawkish outlook could put the brakes on the massive AI-spending spree by the hyperscalers. Shares of NVIDIA fell 2.7%, Micron and Intel shares plunged over 4%, and AMD shares fell the most amongst the pack by 6%.
On the contrary, the Magnificent Seven stocks traded in green across the board, despite broader selling pressure. Alphabet shares opened 0.2% higher, Microsoft shares jumped 1.2%, and Apple Shares traded 0.5% higher at the open.
Shares of Meta opened over 6% higher, the most amongst the pack, after a Bloomberg report cited that the company will build a cloud business to sell excess AI computing capacity to third parties. The shares extended its gains in the early trading session to trade nearly 8% higher at $604 per share.