Stocks closed lower as a cluster of concerns hit markets at once this week: Nvidia's sudden chief executive transition, renewed tension tied to the Iran conflict, and firming bets that the Federal Reserve will raise interest rates again next month. The Dow Jones Industrial Average fell 189.40 points, or 0.4%, to close at 52,297.09. The S&P 500 lost 0.4% to end at 7,592.40, and the Nasdaq Composite, which is weighted heavily toward technology companies, declined 0.4% to 25,366.09.
Nvidia shares were among the session's steepest decliners, falling 2.3% in the wake of Jensen Huang's resignation as chief executive, a reminder of how closely a single company's leadership has become tied to broader market sentiment given Nvidia's outsized role in the artificial intelligence trade. Within the S&P 500, materials, industrials and financials shares led the declines, falling 1.5%, 0.9% and 0.7% respectively, while nine of the index's eleven sectors ended in negative territory.
Underlying the selloff was a shift in expectations for the Federal Reserve. After the central bank held its benchmark rate steady at 3.75% to 4% at its late October meeting, investors spent the following two weeks progressively pricing in a near-certain rate increase in December, a reversal from a few weeks earlier when a hold still looked plausible. A hotter-than-expected consumer inflation report earlier in the month pushed the odds of a December hike as measured by CME's FedWatch tool above 88%, and at least one Fed policymaker, Governor Christopher Waller, said this week he would support a quarter-point increase and could back a larger half-point move if inflation data worsens further.
Despite the down week, the market has not been without pockets of strength: the S&P 500 still posted 18 new 52-week highs during the session, even as broader sentiment stayed cautious. Investors are now looking ahead to the Fed's December meeting as the next major catalyst, alongside any fresh developments from Iran and from Nvidia's search for a permanent chief executive.
The Federal Reserve's December meeting is now the next major marker for markets, with investors watching incoming inflation and jobs data for any sign that could shift the odds away from a rate increase.
Why did stocks fall this week?
Investors were reacting to Nvidia's abrupt CEO transition, renewed tension tied to the Iran conflict, and rising expectations of a Federal Reserve rate increase in December.
Is the Fed expected to raise rates in December?
Market pricing shows an elevated probability, above 88% by one widely watched measure, following hotter-than-expected inflation data, though the Fed has not yet made a final decision.