NEW YORK (AP) — U.S. stock indexes are edging back on Tuesday and trimming some of their stellar gains for the year.
The S&P 500 fell 0.6% in morning trading, though it’s still near its all-time high set earlier this month. The Dow Jones Industrial Average was down 257 points, or 0.6%, as of 10:15 a.m. Eastern time, and the Nasdaq composite slipped 0.7% from its record set the day before.
Nvidia, the superstar stock that’s been a big reason for Wall Street’s run to repeated records this year, fell 3.4% to weigh on the market. It’s on track for an eighth loss in the last nine days and has dropped more than 10% from its record set last month, as its moonshot momentum slows.
Like the overall U.S. market, Nvidia’s stock has climbed so much that critics warn expectations have become too high and that the stock price makes sense only if everything goes correctly for it from here.
Across a survey of global fund managers, strategists at Bank of America found many plowing into U.S. stocks and pulling out of their cash reserves to do so. The survey found fund managers are holding a notably small percentage of their overall portfolios in cash, similar to 2002 and 2011, which preceded tougher times for riskier investments.
The survey’s broadest measure of optimism, based on expectations for economic growth and other indicators, is at its highest since August 2021, strategist Michael Hartnett said in a BofA Global Research report.
The S&P 500 is on track for one of its best years since the millennium because the U.S. economy has remained remarkably resilient, hopes are high that President-elect Donald Trump’s policies will boost growth but not inflation too badly and the Federal Reserve has begun to make things easier by cutting interest rates from a two-decade high.
The Fed is widely expected to announce a third cut to its main interest rate for this year on Wednesday, and officials are also scheduled to unveil projections about where they see rates heading in upcoming years.
Expectations for coming cuts have been on the downswing, though, as inflation looks to be stubborn to slow the last bit down to the Fed’s 2% target.
A report on Tuesday showed sales at U.S. retailers grew more last month than economists expected. That could be an indication of an economy that doesn’t need much more help from easier interest rates. While lower rates can goose the economy, they can also give inflation more fuel.
“The Fed is still on track to cut rates tomorrow, but more strong economic data could make it more likely they’ll pause in January,” according to Chris Larkin, managing director, trading and investing, at E-Trade from Morgan Stanley.
