Stock Pessimism: Markets on a Roller Coaster Ride Due to Solid Economic Data

This week, the previously record-breaking rally of the US stock markets is showing signs of weakness. On Thursday, sentiment on Wall Street deteriorated after traders analyzed robust economic data and reconsidered their expectations for Federal Reserve interest rate cuts. All three major US indices recorded losses in the morning and headed for their third consecutive day of losses. The release of solid economic data led to an increase in bond yields. In particular, the yield on the ten-year US Treasury note rose to about 4.18%. The trend of rising bond yields diminishes the attractiveness of stocks, as investors now have the option to invest their capital in virtually risk-free assets with relatively high returns. Moreover, the current economic situation has clouded the outlook for further interest rate cuts. The probability that the Fed will hold rates steady at its upcoming meeting doubled from 8.1% to 16.6%, although another 25 basis point rate cut is still expected in October. Eric Teal, Chief Investment Information Officer at Comerica Wealth Management, notes that stronger economic data might offer less room for additional rate cuts. Interest in Artificial Intelligence appears to be cooling down this week. Oracle's shares, which recently hit all-time highs, saw a decline of up to 6% following strong revenue forecasts and a consequential trading day. Overall, the shares have dropped 12% since Monday. Nvidia, the flagship of the AI boom, also struggled after it was revealed that $100 billion are to be invested in OpenAI. Despite a slight rebound on Thursday morning, the shares fell by about 6% over three days. In contrast, Intel's shares continued to rise after talks with Apple about a potential investment were announced. The shares increased by 6%, highlighting the company's recent success, which was already boosted by an agreement with Nvidia.