Major indexes fall 1%, focus shifts to upcoming Powell speech

By Caroline Valetkevitch

NEW YORK (Reuters) - The three major U.S. stock indexes ended down more than 1% each on Thursday, led by a drop in the Nasdaq after this week's sharp gains and as investors were nervous ahead of Federal Reserve Chair Jerome Powell's speech Friday.

Shares of Nvidia ended barely higher after they hit a record high early in the session. The company late Wednesday gave a much stronger-than-expected forecast amid demand for its artificial intelligence chips and said it would buy back $25 billion in stock.

All of the major S&P 500 sectors were down on the day, however, and an index of semiconductors dropped 3.4%.

Central bankers and other economic leaders gathered Thursday for an annual symposium in Jackson Hole, Wyoming. Powell's highly anticipated speech on the economic outlook is due Friday.

"As much as investors want to focus on Nvidia and want to focus on tech - and it's been a good year so far - this is still a market that is Fed obsessed. This is still all about what is Jay Powell going to say tomorrow to mess things up... that may lead investors to be sellers instead of buyers," said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma.

The market had gained along with Nvidia this week ahead of the company's report on hopes that its forecast could extend this year's artificial intelligence tech stock rally.

The Dow Jones Industrial Average fell 373.56 points, or 1.08%, to 34,099.42, the S&P 500 lost 59.7 points, or 1.35%, to 4,376.31 and the Nasdaq Composite dropped 257.06 points, or 1.87%, to 13,463.97.

Data earlier Thursday showed claims for U.S. unemployment benefits pointed to a still-strong jobs market, news that some say could support the Fed's hawkish message of higher interest rates for longer. Treasury yields edged higher.

Investors also digested comments from Philadelphia Fed President Patrick Harker, who in an interview on CNBC on Thursday said the Fed will need to keep rates restrictive for a while.

The Fed has been raising rates since March 2022 in an effort to bring down inflation, and investors are looking for clarity on whether more rate increases are ahead and how long the Fed plans to hold rates high.

Among the day's decliners, Dollar Tree shares dropped 12.9% after the retailer forecast annual profit largely below estimates.

Volume on U.S. exchanges was 9.99 billion shares, compared with the 10.87 billion average for the full session over the last 20 trading days.

Declining issues outnumbered advancing ones on the NYSE by a 2.95-to-1 ratio; on Nasdaq, a 2.61-to-1 ratio favored decliners.

The S&P 500 posted 10 new 52-week highs and 13 new lows; the Nasdaq Composite recorded 35 new highs and 220 new lows.

(Additional reporting by Amruta Khandekar, Shreyashi Sanyal and Shristi Achar A in Bengaluru; Editing by Savio D'Souza, Shinjini Ganguli and Deepa Babington)