U.S. stocks closed lower on Wednesday. Federal Reserve Chair Jerome Powell’s remarks regarding potentially stretched stock valuations and anticipation of upcoming inflation data prompted the pullback. Investors are closely monitoring the central bank’s potential interest rate cut trajectory, as the Fed navigates a complex economic landscape showing signs of a softening labour market while striving to manage inflation.
Powell’s comments, reminiscent of former Fed Chair Alan Greenspan’s ‘irrational exuberance’ warning in 1996, highlighted the delicate balance the central bank must maintain in future policy decisions. The materials sector underperformed, dragged down by a significant drop in Freeport-McMoRan shares after the company declared force majeure at its Indonesian Grasberg mine. Conversely, the energy sector saw gains, tracking higher crude oil prices after a surprise drop in U.S. crude inventories.
In company news, Lithium Americas’ U.S.-listed shares surged after reports that the Trump administration was considering an equity stake in the company. Lithium Americas is focused on the development of lithium resources. General Motors, which is involved with Lithium Americas, also saw its shares advance after an upgrade from UBS. Micron Technology shares dipped following the release of its quarterly results, while Oracle’s stock declined after news surfaced that the company was planning a large corporate bond sale.
Attention now turns to the release of personal consumption expenditures data, a key inflation indicator closely watched by the Federal Reserve, later in the week. Investors will be closely scrutinising the data for further clues about the future direction of monetary policy. Declining issues outnumbered advancers on both the NYSE and the Nasdaq, with overall trading volume slightly above the 20-day average.
