U.S. Trade Curbs Impact Tech Stocks; Fed Eyeing Rate Cuts

Tech stocks dropped globally due to potential U.S. trade restrictions on chip equipment, while Treasury yields and the dollar eased. The Fed signaled a likely rate cut by September to boost economic growth. Japanese yen surged, suspected interventions, while gold prices fluctuated and oil prices rose.

Possible U.S. trade curbs on chip equipment weighed heavily on tech stocks across global equity indexes on Wednesday. Meanwhile, Treasury yields and the dollar eased as top Federal Reserve officials indicated a closer approach to cutting interest rates. The Japanese yen surged, possibly due to recent interventions by officials in Tokyo aimed at lifting the currency from multi-decade lows.

The FedWatch tool from CME Group places the likelihood of a rate reduction by September at 98%, a move generally seen as supportive of economic growth. Peter Cardillo, chief market economist at Spartan Capital Securities in New York, stated, 'We are hearing a choral change in Fed speakers preparing the markets for a rate cut beginning in the later part of Q3.'

Comments from Fed Governor Christopher Waller and New York Fed President John Williams echoed this sentiment. The benchmark S&P 500 index dropped 69.64 points (1.23%) to 5,597.45, and the Nasdaq Composite fell 469.10 points (2.54%) to 18,039.74.

Chipmaker stocks slumped following a report on U.S. plans to restrict technology imports to China. Concurrently, Republican presidential candidate Donald Trump suggested that Taiwan should pay the U.S. for its defense. MSCI's global stock gauge declined 6.52 points (0.79%) to 824.69.

Nvidia shares fell over 6% after a turbulent session, while Taiwan's TSMC closed 2.4% lower. Investors show cautious optimism about a second U.S. presidency for Trump, who is running against Democrat Joe Biden.

In currency markets, the yen posted significant gains, suspected to be due to interventions. Bank of Japan data indicated Tokyo may have spent trillions intervening. The dollar index fell 0.45% to 103.74, boosting the euro and weakening the dollar against the yen.

Spot gold prices dipped 0.5% due to profit-taking after reaching record highs. The yield on benchmark U.S. 10-year notes dipped, while softer jobs data and easing inflation increased the likelihood of a rate cut. Oil prices also saw a rise, with U.S. crude closing at $82.85 a barrel.

(Additional reporting by Chuck Mikolajczak and Caroline Valetkevitch, Editing by Sam Holmes, Kim Coghill, Arun Koyyur, Will Dunham, and Gareth Jones)

(With inputs from agencies.)