Stock Market Today: Dow Jones & Nasdaq Surge on Fed Policy Hopes—What Investors Need to Know

Wall Street pulls back as valuation worries surface; energy rallies, eyes on key inflation data U.S. equities slipped for a second straight session Wednesday, trimming September’s record run after Federal Reserve Chair Jerome Powell warned that asset prices look “fairly highly valued.” The Dow Jones Industrial Average shed 171 points, or 0.37%, to 46,121.28; the S&P 500 dipped 0.28% to 6,637.98, and the tech-heavy Nasdaq Composite lost 0.33% to 22,497.86. Powell’s caution echoed the ghost of “irrational exuberance” and triggered profit-taking in this year’s AI high-flyers. Nvidia, Oracle and Micron fell up to 2.8%, pressuring the information-technology sector. Analysts note that the S&P 500 is still priced around 23–24 times forward earnings—lofty by historical standards—making the index vulnerable to any disappointment in growth or policy. Energy the lone bright spot Brent crude’s climb toward a seven-week high powered the S&P 500 Energy sector up 1.2%, with Exxon Mobil and Chevron outperforming peers. U.S. crude inventories unexpectedly declined 0.6 million barrels last week, reinforcing the view that supply remains tight heading into winter. Housing surprises to the upside August new-home sales jumped 20.5% to an annualized 800,000 units, the strongest reading since January 2022, offering a counterweight to recession fears. Homebuilder shares ticked higher on the data. Key themes traders are watching • PCE price index (Fed’s preferred inflation gauge) due Friday—any upside surprise could temper rate-cut hopes. • Quarter-end portfolio rebalancing may heighten volatility. • Bond yields: the 10-year Treasury hovered near 3.85%; a break above 4% would likely pressure growth stocks. • Earnings season kicks off in two weeks, with megacap tech guidance under the microscope after a multi-year AI spending spree. Technical picture Despite back-to-back losses, the S&P 500 remains above its 50-day moving average; however, momentum oscillators are flashing mild bearish divergences. A decisive drop below 6,600 could open the door to a retest of the 6,500–6,520 support band. Bottom line for investors Short-term consolidation looks healthy after a parabolic summer rally, but stretched valuations mean stock-picking and sector rotation will be critical heading into Q4. Keeping dry powder for potential pullbacks—and watching Friday’s PCE print—may prove prudent as markets recalibrate rate-cut timelines.