U.S. stocks retreated from record highs on Wednesday as investors awaited pivotal earnings from AI bellwether Nvidia (NVDA) and further clues to the Federal Reserve’s thinking on lowering interest rates.
S&P 500 (ES=F) futures fell about 0.1% to a record close. Dow Jones Industrial Average futures (YM=F) also fell 0.1%, while contracts for the tech-heavy Nasdaq 100 (NQ=F) remained flat.
This week, the stock managed to hit an all-time high as the market meandered to see if Nvidia would meet sky-high earnings expectations. Investors are bracing for big moves in the company’s stock price and other AI-related potential following its first-quarter results, which are expected to be released after the bell. All of this will be a huge challenge for the broader market as a whole.
Investors can also get a second reality check in the form of minutes from the last Fed meeting. The departure from policymakers’ repeated messages that they want to be more confident that inflation is cooling before they start cutting interest rates is drawing attention. But some were nervous ahead of the release of British inflation figures later on Wednesday, suggesting price pressures elsewhere will be difficult to contain.
read more: How does the labor market affect inflation?
At the same time, Target’s (TGT) quarterly results raised concerns about how the economy will hold up. Retail giants’ profits fell short as consumers cut back on non-essential purchases due to inflation. The company’s stock price fell 8% in premarket trading.
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Goldman stays realistic about government debt
Goldman Sachs has released new research that politicians who like to talk about the nation’s ballooning debt will likely be eager to hear.
The bank’s economics team has raised the debt-to-GDP ratio to 130% by 2034, up from a forecast of 97% published in 2019.
“The outlook for U.S. fiscal sustainability has become more grim over the past five years. The primary deficit (the deficit excluding interest costs on the debt) is still expanding by about 5% of GDP, historically at full employment, and the debt stock remains large. The debt-to-GDP ratio rose 19 percentage points to 98% and is likely to soon surpass its highest level since World War II, especially as rising expected future interest rates have roughly doubled interest rates on new Treasury debt. “The primary deficit – the deficit excluding interest costs on the debt as a percentage of GDP – is still expanding at a historically low rate, while the debt stock remains large. The debt-to-GDP ratio has risen 19 percentage points to 98% and is likely to soon surpass its highest level since World War II, particularly as rising expected future interest rates have nearly doubled. “
The unpleasant chart is below.
Goldman Sachs expects the country’s already bloated debt levels to rise further. (Goldman Sachs)
