Powell’s Valuation Concerns and Sector Weakness Drag U.S. Markets Lower

The Dow slid 171.50 points (0.4%) at 46,121.28, the Nasdaq fell 75.62 points (0.3%) to 22,497.86 and the S&P 500 dipped 18.95 points (0.3%) to 6,637.97. AI darling and market leader Nvidia (NVDA) slid by 0.9% after tumbling by 2.8% on Tuesday while fellow AI player Oracle (ORCL) slumped by 1.7%. Federal Reserve Chair Jerome Powell’s remarks have added pressure to the markets, as he noted that equity prices appear fairly highly valued after recent record highs. His comments reignited concerns about stretched valuations, causing traders to grow cautious about the sustainability of the rally. The uncertainty has kept investors on edge, weighing sentiment in the markets. Powell also highlighted the complex outlook for interest rates, pointing to inflation risks on the upside and employment risks on the downside. He stressed that there is “no risk-free path” in setting policy, warning against both overly aggressive cuts and keeping rates too high for too long. This balancing act reflects the Fed’s difficult task of managing growth without derailing progress. Computer hardware stocks moved sharply lower, with the NYSE Arca Computer Hardware Index tumbling by 2.3% after ending Tuesday's trading at a record closing high. Gold stocks emerged significantly weak amid a pullback by the price of the precious metal, resulting in a 2.2% slump by the NYSE Arca Gold Bugs Index. Airline stocks too came under pressure as the day progressed, dragging the NYSE Arca Airline Index down by 1.6%. Networking, brokerage and telecom stocks also saw notable weakness while energy stocks bucked the downtrend amid a continued surge by the price of crude oil. Asia-Pacific stocks turned in a mixed performance. Japan's Nikkei 225 Index rose by 0.3% and Hong Kong's Hang Seng Index jumped by 1.4% while Australia's S&P/ASX 200 Index slid by 0.9%. The major European markets also ended the day mixed. While the French CAC 40 Index fell by 0.6%, the German DAX Index crept up by 0.2% and the U.K.'s FTSE 100 Index increased by 0.3%. In the bond market, treasuries moved back to the downside following the strength seen in the previous session. Subsequently, the yield on the benchmark ten-year note which moves opposite of its price, climbed 2.7 bps to a nearly three-week closing high of 4.14%.