Fed holds interest rates steady after cliffhanger meeting, but three officials dissent

Nerves about artificial intelligence are weighing on the Nasdaq Composite.

The tech-heavy index has dropped about 9% since its last record high on June 2, putting it on the cusp of a so-called correction, when an index drops at least 10% from its most recent peak.

The Nasdaq closed in correction back in March, before rebounding and reclaiming record highs in April, May and June, as shares of chipmakers soared and helped to boost the index.

But the Nasdaq has struggled in recent weeks as investors have taken profits after strong rallies and reassessed whether massive AI spending will deliver meaningful returns.

An index tracking chipmakers is down more than 25% since its peak in late June. An ETF tracking the Magnificent Seven tech stocks – Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla – is down more than 10% since its peak in mid-May.

The volatility has been more intense in Asia: The benchmark Kospi index in South Korea is down 38% from its last closing record high on June 22. Still, it’s up 34% this year.

“The focus will turn to the Fed’s rate announcement and Chairman Warsh’s press conference today, but the tech sector is still the most important issue on the docket for investors this summer,” Matt Maley, chief market strategist at Miller Tabak + Co, said in a note.

“We still believe that the decline in the chip stocks…and the dramatic fall in South Korea’s Kospi index…are clear warning signs for US investors,” Maley said.

Meanwhile, the S&P 500 is down less than 4% since its last record high in June. The Dow is down about 2% since its last record high in early July.