Stocks fall after Fed minutes with Nvidia on tap
Nvidia shares fall ahead of results, due after market close
Minutes show fed officials hopeful for cooling inflation
Target shares lower after weak results
Updated at 4:00 p.m. ET/2000 GMT
By Chuck Mikolajczak
NEW YORK, May 22 (Reuters) - U.S. stocks fell onWednesday as investors digested minutes of the Federal Reserve's most recent meeting ahead of quarterly results from AI chipmakerNvidia, due after the closing bell.
Stocks struggled for direction for most of the session but weakened after the minutes showedU.S. central bank officials still hadfaith price pressures would ease, but slowly, due to disappointment over inflation readings.
The Fed's April 30–May 1 meeting followed three straight months of data that showed sticky inflation, but before more recent reports that showed price pressures could be cooling again.
Investors are focused on whethersemiconductor bellwether Nvidia's NVDA.O first-quarter results can meet sky-high expectations and will test whether the outsized rally in artificial intelligence-related stocks can be sustained.
Nvidia shares, which fell in the session, have surged about 90% this year after rocketing almost 240% in 2023.
"The markets are just waiting for Nvidia to make sure that even if they beat ... what does it look like going forward and what is the forward-looking thinking with justifying where valuations are," said Megan Horneman, chief investment officer at Verdance Capital Advisors in Hunt Valley, Maryland.
"It's valuations that are more important so regardless of whether it's a knee-jerk reaction to the upside or to the downside, when we start to parse through that earnings report and look at the valuation that some of these companies are asking for, is it too high?"
According to preliminary data, the S&P 500 .SPX lost 14.32 points, or 0.27%, to end at 5,307.09 points, while the Nasdaq Composite .IXIC lost 31.08 points, or 0.18%, to 16,801.54. The Dow Jones Industrial Average .DJI fell 200.21 points, or 0.50%, to 39,672.78.
Stocks' rally to record highs this month has been fueled in partby AI optimism, a solid earningsseason and reignitedhopes for rate cuts by the Fed this year.
Analysts polled by Reuters see the S&P 500 closing the year near current levels, at 5,302 points, but warned the index's strong run means it risks a correction in the comingmonths.
Markets are pricing in a 59% chance of the Fed cutting rates by at least 25 basis points at its September meeting, down from 65.7% in the prior session, accordingto CME'sFedWatch Tool.
Chipmaker Analog Devices ADI.O jumped after forecasting third-quarter revenue above expectations.
Energy .SPNY was the worst hit sector, downabout 2% asoil prices fell for a third straight session.
Retailer Target TGT.N tumbledafter itsquarterly earnings and current-quarter forecast missed estimates.
TJ Maxx parent TJX TJX.N gained after raising its annual profit forecast.
Reporting by Chuck Mikolajczak; Editing by Richard Chang
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