US Market Reaction To Kevin Warsh's Speech: Nasdaq Falls 386 Pts; Dow, S&P 500 Down; Why Wall Street Is Down?

The US stock market reacted on a mixed note to US Federal Reserve chair Kevin Warsh's speech at the International Monetary Fund (IMF) meetings in Bangkok, Thailand. On Friday, the Dow Jones emerged as the top performer, but the Nasdaq Composite became the top loser. The S&P 500 traded volatile with a marginal downside. As per the expert, the bigger sentiment-driving factor is the changing nature of the AI trade.

Dow Jones Today Live:

At the time of writing, Dow Jones erased its early gains to trade at 52,146.98, down by 30.71 points. The loss was limited due to strong buying in mega-cap stocks. Few minutes ago, Dow Jones rose by 174.35 points or 0.33% to trade around 52,352.04. The benchmark has touched an intraday high and low of 52,582.32 and 52,303.17. The index opened on Friday at 52,308.28.

Among large-caps, JP Morgan gained 2.1%, Home Depot surged 1.8%, Walt Disney climbed 1.7% and Coca-Cola rose by 1.6%. American Express also rallied by more than 1.5%. Other mega caps like Merck, Chevron, Apple, Nike, Honeywell International and Johnson & Johnson rallied by more than 1% each.

Nasdaq Composite Today Live:

Nasdaq took the most beating. The Nasdaq Composite index plunged by 368.68 points or 1.38% to trade around 26,344.35. The index dropped by at least 386 points to hit an intraday low of 26,327.12. In the opening bell, the index opened lower to 26,652.98 and held the intraday high of 26,674.66 before correcting steeply.

Tech giants like Alphabet dropped 1.5%, while Microsoft plunged 1.7%. Amazon is down 0.5%. Also, SpaceX and Meta crashed over 2.2% each. Broadcom and Tesla slipped by 2.6% and 1.11%.

Tesla and SpaceX could not grab buyers despite launching the world's first rocket-style flying car called Tesla Roadster which is equipped SpaceX thruster. The flying car is likely to land in 2028. The car was first revealed in November 2017 and was expected to begin deliveries in 2020. However, due to several delays, Roadster missed its initial schedule until October 15, 2026. The car is not entirely launched and is just a demo. Reuters reported that the production is expected in 2028.

S&P 500 Today Live

Also, S&P 500 extended its decline to trade at 7,696.50, down by 47.56 points, or 0.61%. Accordingly, S&P 500 erased its 7,700 mark.. The benchmark opened at 7,745.32 and touched an intraday high and low of 7,756.84 and 7,719.02 respectively.

Markets reassessed risks in the AI trade ahead of likely rate hikes by the Federal Reserve. CoreWeave was nearly 7% lower, extending this week's losses to 18% to underscore fresh credit risk flare-ups for AI infrastructure companies. The sector was recently pressured by relatively tame revenue figures from Anthropic and the outlook for higher interest rates on debt-ridden companies. Data released this week showed higher consumer inflation and soaring producer prices, both headline and core. Micron, AMD, and Marvell fell by up to 3%, as per Trading Economics.

"The broader takeaway for investors is that AI is no longer a one-way trade. The market is starting to differentiate between companies that have strong balance sheets, visible revenue and the ability to fund AI investment internally, and those relying heavily on debt to finance future growth. For Indian investors with exposure to US technology, that makes earnings quality, capital expenditure and balance-sheet strength increasingly important alongside headline AI growth," said brokerage, Vested in a note.

In Vested's view, investors are becoming more selective as concerns grow around the amount of debt being used to finance data centres and AI infrastructure. CoreWeave is a good example of that shift. Its commercial backlog remains large, but the company is carrying roughly $50 billion in debt, which is forcing markets to look more closely at whether AI spending can generate returns quickly enough to justify the financing behind it.

On Friday, watch out for New York Fed Services Business Activity, Import Price Index, Export Price Index, Industrial Production, Manufacturing Production, Capacity Utilization, and Treasury International Capital Flows data. In case of quarterly earnings, companies like Citizens Financial Group Inc. (CFG), M&T Bank Corp. (MTB), Regions Financial Corp. (RF), Truist Financial Corp. (TFC), and Travelers Companies Inc. (TRV) will be in focus.

US Fed Kevin Warsh Speech At IMF Bangkok Meeting

During his speech, Warsh specifically avoided giving any clear guidance on FOMC's next rates decision. The Fed are going to declare their bi-monthly monetary policy in the end of this month.

He shed light on rising energy prices, persistent inflation and higher borrowing costs that create unprecedent uncertainty on the overall global economy. However, he was also optimistic of US economy's growth ahead and believes artificial intelligence (AI) to become major driving factor for future growth.

As per Warsh, AI has become one of the most significant economic changes of his lifetime. However, he did not shy away from warning about heavy investment in AI is creating near-term price pressures.

Warsh believes that AI will improve productivity and expand US economy's ability for goods and services in the future years. He also believe that usage of AI could also help central banks to analyse economic information effectively and identify inflation trends sooner.

On the Iran conflict, Warsh is confident that the global economy will continue to be resilient. At present, IMF has predicted 3.1% global economic growth for this year.

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