By Johann M Cherian and Ragini Mathur
July 29 (Reuters) - Wall Street's main indexes dropped on Wednesday as investors awaited the Federal Reserve's monetary policy verdict against the backdrop of an 8% jump in oil prices, while chip stocks remained under pressure ahead of Big Tech earnings.
The benchmark S&P 500 hit its lowest level in a month, while the tech-heavy Nasdaq was at a three-month low, dropping over 9% from its June record high.
Chip stocks such as industry leader Nvidia fell 2.3% and Micron
lost 4.6%, sending the Philadelphia Semiconductor index down 3.6% to a more than two-month low.
Industrials slid 2.5% and led declines on the S&P 500, with AI infrastructure company Vertiv down 13.2% after missing quarterly revenue expectations.
Quarterly results from Microsoft and Meta are due after the bell, while Amazon.com and Apple are expected later this week. Traders will closely watch for signs that their billion-dollar AI investments are boosting earnings enough to meet their lofty expectations.
Shares of the companies edged lower in early trade, except for Microsoft, which added 0.3%.
"What investors are really looking for is some sort of stable growth," said Louis Kondratev, a trader at XFUNDs.
"If there's not going to be any sort of strong profits or strong clear growth and especially a clear path towards rebuilding free cash flow, some of these companies will be feeling it and their stocks are going to be feeling it too."
Global markets have been volatile this month as investors questioned the sustainability of the AI spending boom after signs that major U.S. companies were deepening a web of AI-linked investments and continuing to funnel billions into the technology at the expense of free cash flow.
The scrutiny comes as competition from China heats up, both in the race to develop advanced chips and as Chinese firms roll out cheaper AI models. On Wednesday, South Korean chipmaker SK Hynix's bumper quarterly results fell short of lofty investor expectations. U.S.-listed shares of the company dipped 1%.
At 11:39 a.m. ET, the Dow Jones Industrial Average fell 829.00 points, or 1.57%, to 51,918.32, the S&P 500 lost 62.98 points, or 0.85%, to 7,365.80 and the Nasdaq Composite lost 281.06 points, or 1.13%, to 24,595.85.
Recently, tech concerns have prompted investors to focus on other areas of the market such as consumer staples and healthcare, which were up 0.5% and 0.4%, respectively, on Wednesday.
FED IN FOCUS
The Fed will announce its monetary policy verdict at 2:00 p.m. ET amid crude prices soaring to $89.94 a barrel, as U.S. President Donald Trump said that the U.S. would respond to Iran's attacks in Jordan.
Traders see a 39.9% chance of a rate hike, according to LSEG data, after price pressures eased in the prior month. However, they are confident that rates will rise by at least 25 basis points by year-end.
Markets will scrutinize Chairman Kevin Warsh's comments after he said the central bank would avoid giving explicit guidance on future interest-rate moves.
"It's looking like it's going to be more of a hawkish hold, so that might hit those high-value CapEx-heavy companies that are anticipated to keep spending," XFUNDs' Kondratev said.
Ford Motor gained 4.4% after raising its annual profit outlook for a second time this year. HVAC solutions maker Lennox tanked 20% after lowering its annual profit forecast.
Declining issues outnumbered advancers by a 2.22-to-1 ratio on the NYSE and by a 2.32-to-1 ratio on the Nasdaq.
The S&P 500 posted 27 new 52-week highs and two new lows, while the Nasdaq Composite recorded 92 new highs and 143 new lows.
(Reporting by Johann M Cherian and Ragini Mathur in Bengaluru; Editing by Devika Syamnath and Maju Samuel)
