NEW YORK (AP) — Drops in shares of Nvidia and other tech giants weighed heavily on Wall Street on Monday, maintaining the stock market in its prolonged slump. Investors are grappling with the reality of potentially fewer interest rate cuts from the Federal Reserve, which has been a key driver of market optimism.
Market Performance Overview
The S&P 500 fell by 0.6% in midday trading, marking its fourth losing week out of the last five. The Nasdaq Composite saw a sharper decline of 1.3%, driven by losses in major technology stocks. Conversely, the Dow Jones Industrial Average rose 139 points, or 0.3%, distinguishing itself due to its lesser exposure to the tech sector.
Tech Sector Under Pressure
The tech sector has been under significant pressure, with Nvidia dropping 2.9% and leading the losses in the S&P 500. Despite this, Nvidia's recent losses represent only a small dent in its massive gains over the past few years, fueled by the AI technology boom. The stock had nearly quintupled over three years amid surging demand for AI-related technologies.
Nvidia's recent downturn follows President Joe Biden's proposal for a new framework governing the export of advanced AI chips. The industry has raised concerns that abrupt implementation of such rules could disrupt global supply chains and harm U.S. companies.
Other tech giants also faced declines, with Apple losing 2.3% and Microsoft slipping by 1.2%. As two of the largest companies, their downturns significantly impacted the broader market indices. Despite the S&P 500 trending downward, more individual stocks within the index rose than fell.
Broader Market Reactions
Moderna experienced the most significant loss within the S&P 500, plummeting 21.5% after its revenue forecast for the upcoming year fell short of expectations. The company is accelerating cost-cutting measures in response to dwindling demand for COVID-related products.
Retail giant Macy's also faced challenges, with its shares dropping 6.3% after projecting that its revenue for the last quarter of 2024 would meet or fall slightly below the lower end of its forecasted range.
Energy Sector Gains
Conversely, oil and gas companies benefited from rising oil prices. Benchmark U.S. crude rose by 3% to $78.82 per barrel, and Brent crude increased by 1.8% to $81.23 per barrel. These gains came after the Biden administration expanded sanctions on Russia's energy sector.
Exxon Mobil saw a 2.2% increase, while Valero Energy jumped 6.4%, reflecting investor confidence in the energy sector amid tightening global supplies.
Bond Market Trends
The bond market continued to exert influence over Wall Street, with Treasury yields inching higher. The 10-year Treasury yield rose to 4.79% from 4.76% late Friday, continuing its upward trajectory over the past month. In September, the yield was below 3.65%, highlighting the rapid increase.
Strong economic reports have contributed to rising yields, alongside concerns about potential inflationary policies under President-elect Donald Trump. Analysts anticipate that upcoming inflation data, set for release on Wednesday, could further impact bond markets. Economists predict a slight acceleration in inflation to 2.8% in December from 2.7% in November.
Upcoming Economic Indicators
"Rates remain the most important variable for equity market direction," noted Michael Wilson and other strategists at Morgan Stanley. The upcoming week will be pivotal, with earnings reports from major banks like Bank of America and JPMorgan Chase expected to set the tone for the earnings season.
If Treasury yields continue their upward trend, stock prices may need to adjust downward, or companies will need to demonstrate robust profit growth to offset the pressure.
International Markets
Global markets mirrored Wall Street's challenges, with most indices in Europe and Asia closing lower. Hong Kong's market fell by 1%, while Shanghai's dipped by 0.2%, despite China reporting stronger-than-expected export growth in December. Factories in China rushed to fulfill orders ahead of potential tariff increases threatened by the incoming Trump administration.
In summary, Wall Street remains in a challenging environment, with tech stocks underperforming amid concerns over Federal Reserve policies and global economic uncertainties. Investors will closely watch upcoming inflation data and corporate earnings reports to gauge the market's direction.
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