Stock market today: S&P 500 pulls back for second day as AI stocks stutter

Investing.com-- The S&P 500 closed lower for a second day in a row Wednesday, as AI-linked stocks including Nvidia continued to fall and sentiment on further rate cuts soured following recent cautious remarks from Federal Reserve Chair Jerome Powell.

At 4:00 p.m ET (20:00 GMT), the Dow Jones Industrial Average fell 171 points, or 0.4%, the S&P 500 index fell 0.3%, and the NASDAQ Composite dropped 0.3%.

AI stocks continue to fall; Micron slips

AI-linked stocks including NVIDIA Corporation (NASDAQ:NVDA) and Oracle Corporation (NYSE:ORCL) continued to lead the market lower. 

Micron Technology (NASDAQ:MU) slipped despite the memory chip manufacturer posting a fresh quarter of growth fueled by soaring demand from AI developers.

Alibaba (NYSE:BABA) was also in the spotlight after the Chinese e-commerce giant unveiled its most powerful AI model to date, called Qwen3-Max, and vowed to increase investment in the infrastructure underpinning the nascent technology.

Powell comments prompt caution 

Sentiment has improved Wednesday, after a negative session on Tuesday, snapping a three-session streak of record high closes, following comments from Fed Chair Powell, who said that the Fed now faces a balancing act with “no risk-free path” as it moves to curb sticky inflation and stem further weakness in the labor market. 

Speaking at a luncheon in Warwick, Rhode Island, Powell noted that U.S. economic growth had moderated this year, while the labor market had cooled. He also noted that inflation remained above the Fed’s 2% annual target. 

Powell flagged a largely cautious, data-driven approach to future rate cuts, warning that inflation could rise back up if rates were cut too aggressively.

The Fed cut rates by 25 basis points last week, with markets expecting at least two more similar cuts this year. But Powell’s comments dampened expectations of more easing.

GDP, PCE inflation data due this week 

Investors are now awaiting more insight into the world’s biggest economy, with a final reading on second-quarter gross domestic product growth due on Thursday. 

The print had earlier shown the U.S. economy expanding at a strong pace in the second quarter. But this growth is expected to moderate in the coming quarters amid pressure from sticky inflation and higher trade tariffs. 

More closely watched this week will be PCE price index data, due on Friday. The print is the Fed’s preferred inflation gauge, and is likely to factor into expectations for future interest rate cuts. 

Headline PCE inflation is expected to have remained steady, while core PCE inflation is seen remaining well above the Fed’s 2% annual target.

Q4 offers upside - BofA 

Bank of America analysts said in a note Wednesday that history suggests investors should look forward to the final stretch of 2025. 

According to the bank, “Q4 tends to be the most wonderful time of the year” for equities, with ten of ten major indices showing strong positive average returns.

BofA highlighted that the S&P 500 has averaged a 2.84 percent gain in the quarter, rising 74 percent of the time.

Official U.S. government energy data is due later on Wednesday.

(Ambar Warrick and Scott Kanowsky contributed to this article.)