Stocks Drop Amid Weakness in Technology Sector

On Monday, the S&P 500 Index dropped by 0.29%, while the Dow Jones Industrial Average managed a slight increase of 0.12%. The Nasdaq 100 Index saw a more significant decline of 0.92%. In the futures market, March E-mini S&P futures fell by 0.41%, and March E-mini Nasdaq futures decreased by 1.11%.

The overall stock market faced pressure, continuing from last Friday’s significant losses. On that day, the S&P 500 fell by 1.71%, and the Nasdaq 100 dropped by 2.06%. One of the main reasons for these declines was disappointing economic news from the U.S. The University of Michigan reported that consumer sentiment fell to its lowest level in 15 months, and inflation expectations reached a 29-year high.

Several major tech stocks, often referred to as the “Magnificent Seven,” also contributed to the downward trend on Monday, most notably Nvidia, Meta, Tesla, and Microsoft. Even though there was some support in the market as the yield on 10-year Treasury notes fell slightly, it wasn’t enough to offset the overall losses.

In political news, the Trump administration announced new measures against China, proposing fees on Chinese-made commercial ships, which led to a drop in Chinese shipping stocks. Trump also directed the U.S. Committee on Foreign Investment to restrict Chinese investments in key sectors like technology and natural resources.

At a press conference with French President Macron, Trump restated that tariffs on imports from Mexico and Canada would be imposed as scheduled. Despite initially delaying these tariffs for a month, he emphasized that reciprocal tariffs would still be implemented.

Investors are now looking toward Nvidia’s earnings report scheduled for after Wednesday’s market close. This week is packed with economic indicators as well. On Tuesday, the consumer confidence index is expected to reveal a slight decline, while Thursday will see the release of the Q4 GDP report, anticipated to show a 2.3% annualized increase. On Friday, the PCE price index, preferred by the Federal Reserve as an inflation measure, is predicted to cool down a bit from December’s numbers.

The market is currently assessing a small chance (3%) of a rate cut from the Federal Reserve in the upcoming meeting.

In Europe, the German Dax index rose by 0.62% after the conservative party claimed a plurality in the German elections, although forming a ruling coalition remains uncertain. Other European markets had mixed results, with the Euro Stoxx 50 and China’s Shanghai Composite Index closing down slightly, while Japan’s Nikkei 225 saw a small gain.

Interest rates on 10-year Treasury notes rose by 6 ticks on Monday, as the yield fell to 4.398%. Safe-haven demand for these notes increased as stock prices dropped, although the market faced an oversupply due to treasury sales. European bond yields showed variation, with some rising and others falling.

In stock movements, most of the Magnificent Seven experienced declines, with Nvidia taking the biggest hit at nearly 3% down ahead of its upcoming earnings report. Other companies like Meta, Tesla, and Microsoft also saw losses, while Apple gained modestly after announcing plans to hire more employees and invest heavily in U.S. innovation.

Palantir Technologies faced a drop of over 10%, continuing a downward trend due to concerns about defense spending cuts. Conversely, Berkshire Hathaway surged by over 4% thanks to a strong earnings report, and Nike rose by more than 5% following a rating upgrade.

In summary, the market remains uncertain with various economic indicators on the horizon and geopolitical factors influencing stock performance, making investors cautious as they navigate through these changes.