Market Update: Mixed Movements Amid Economic Headwinds
The S&P 500 Index ($SPX) (SPY) declined by -0.29% on Monday, while the Dow Jones Industrials Index ($DOWI) (DIA) saw a modest increase of +0.12%. In contrast, the Nasdaq 100 Index ($IUXX) (QQQ) dropped by -0.92%. Futures also pointed downward, with March E-mini S&P futures (ESH25) falling -0.41% and March E-mini Nasdaq futures (NQH25) reducing by -1.11%.
Market Pressures and Economic Indicators
Both the broad market and technology stocks faced downturns, adding to significant losses from Friday, where the S&P 500 index dropped -1.71% and the Nasdaq 100 index fell -2.06%. Contributing to this trend was the University of Michigan’s February consumer sentiment index, which fell to a 15-month low of 64.7, alongside rising inflation expectations hitting a 29-year high of +3.5%.
Influences from Key Stocks and Government Actions
Losses among the Magnificent Seven stocks, particularly from Nvidia, Meta, Tesla, and Microsoft, weighed heavily on the market. However, there was slight support from falling 10-year T-note yields, which decreased by -3 basis points.
Meanwhile, the Trump administration introduced new measures impacting trade relations with China. Proposed fees on commercial ships made in China led to a decline in Chinese shipping stocks. During a press conference with French President Macron, President Trump confirmed that US tariffs on imports from Mexico and Canada would remain on schedule, despite a brief delay until March 4.
What’s Ahead: Earnings Reports and Economic Forecasts
Investors are now keenly awaiting Nvidia’s earnings report set for release after Wednesday’s market close. Additionally, the week’s economic calendar is packed, with the February Conference Board US consumer confidence index projected to drop by -1.4 points to 102.7. Thursday’s US Q4 GDP report is anticipated to show a quarterly growth of +2.3%, bolstered by a +4.1% rise in personal consumption. On Friday, the January PCE price index, which is the Fed’s preferred inflation measure, is expected to decrease slightly to +2.5% year-over-year from December’s +2.6%.
At present, markets assign a 3% probability for a -25 basis points rate cut at the upcoming Federal Open Market Committee (FOMC) meeting scheduled for March 18-19.
Global Market Movements
In Europe, the Dax stock index increased by +0.62% after the conservative Christian Democrat party, under Friedrich Merz, emerged with a plurality in a recent German election. However, the formation of a ruling coalition may prove challenging.
Other overseas markets displayed mixed results: the Euro Stoxx 50 fell by -0.39%, China’s Shanghai Composite Index decreased by -0.18%, while Japan’s Nikkei Stock 225 rose by +0.26%.
Interest Rates Overview
On Monday, March 10-year T-notes (ZNH25) gained +6 ticks as the yield on 10-year T-notes fell to 4.398%, down by -3.3 basis points. The demand for safe-haven assets supported T-note prices, although their gains were pressured by a supply overhang, following the Treasury’s sale of $69 billion of 2-year T-notes. Upcoming Treasury sales include $70 billion of 5-year T-notes on Tuesday and $28 billion of floating-rate 2-year T-notes and $44 billion of 7-year T-notes on Wednesday.
European bond yields fluctuated on Monday. The yield on Germany’s 10-year bund rose by +0.8 basis points to 2.477%, while the UK’s 10-year gilt yield fell by -0.7 basis points to 4.564%.
Swaps markets currently reflect a 98% likelihood of a -25 basis point rate cut by the European Central Bank (ECB) at its policy meeting on March 6.
Key US Stock Movers
Most of the Magnificent Seven stocks declined on Monday, with only Alphabet and Apple experiencing gains. Nvidia (NVDA) was notably the biggest loser, dropping by approximately -3% ahead of its earnings report. This decline had a cascading effect on the semiconductor industry, with Marvell Technology (MRVL) and Broadcom (AVGO) falling by more than -5% and -4%, respectively.
Meta (META) decreased by -2.5%, extending its -7% loss from last week and reaching a new one-month low. Tesla (TSLA) saw a drop of -2.2%, despite positive news about an upcoming software update for Chinese customers. Microsoft (MSFT) experienced a -1% decline following reports of canceled leases for US data center capacity, raising concerns about demand.
In contrast, Apple (AAPL) rose by +0.86% after announcing a plan to hire 20,000 new employees and invest at least $500 billion in the US over the next four years, coupled with the establishment of a new manufacturing plant in Houston.
Palantir Technologies (PLTR) fell over -10%, reflecting anxieties about potential cuts in US defense spending. Conversely, Berkshire Hathaway (BRK.B) saw an increase of over +4% due to a significant earnings surge primarily driven by increased insurance underwriting. Nike (NKE) rose by more than +5% after receiving an upgrade to a buy rating from Jefferies, which predicts a strong recovery. However, Domino’s Pizza Inc. (DPZ) dropped by -1.5% following disappointing Q4 sales reports linked to tighter consumer spending. Robinhood Markets (HOOD) fell by over -3%, even after the SEC closed its crypto investigation without taking action.
Upcoming Earnings Reports
Investors will also be looking at upcoming earnings reports, including those from Home Depot Inc (HD), Keurig Dr Pepper Inc (KDP), Henry Schein Inc (HSIC), Pinnacle West Capital Corp (PNW), Public Service Enterprise Group (PEG), American Tower Corp (AMT), Sempra (SRE), Caesars Entertainment Inc (CZR), Extra Space Storage Inc (EXR), First Solar Inc (FSLR), Axon Enterprise Inc (AXON), Intuit Inc (INTU), Keysight Technologies Inc (KEYS), and Workday Inc (WDAY) slated for February 25, 2025.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are solely for informational purposes. For more details, please view the Barchart Disclosure Policy here.
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