Market Snapshot: Tech Selloff and Trade Deficits Weigh on U.S. Stocks
Stocks dipped on Friday, influenced by rising yields and disappointments in major tech firms.
The S&P 500 Index ($SPX) (SPY) closed down -1.11%, while the Dow Jones Industrials Index ($DOWI) (DIA) recorded a drop of -0.77%. The Nasdaq 100 Index ($IUXX) (QQQ) fell by -1.36%. In the futures market, March E-mini S&P futures (ESH25) showed a decrease of -1.08%, and March E-mini Nasdaq futures (NQH25) were down by -1.30%.
On Friday, trading was influenced by a selloff in the Magnificent Seven tech stocks. Additionally, increasing T-note yields pressured equity prices. The market faced low volumes due to holiday trading dynamics, which led to more pronounced stock movements.
As for economic indicators, the U.S. trade deficit widened to -$102.9 billion in November, up from -$98.3 billion in October. This figure was worse than the expected -$101.2 billion, posing potential challenges for Q4 GDP and raising concerns for stocks. Wholesale inventories unexpectedly decreased by -0.2% month-over-month, contrasting with predictions of a +0.1% increase. In comparison, retail inventories climbed +0.3% month-over-month, aligning with forecasts.
Encouraging performance in Asian markets offered some support to U.S. stocks. China’s Shanghai Composite rose to a two-week high, buoyed by expectations of new economic stimulus, while Japan’s Nikkei Index surged to a five-and-a-quarter month high due to favorable economic news on retail sales and industrial production.
The markets are currently pricing in only an 11% chance of a -25 basis point rate cut during the upcoming FOMC meeting scheduled for January 28-29.
International stock markets showed resilience on Friday, with the Euro Stoxx 50 rising to a one-week high and closing up +0.84%. Meanwhile, China’s Shanghai Composite increased by +0.06%, and Japan’s Nikkei Stock 225 jumped +1.80%.
Interest Rates
March 10-year T-notes (ZNH25) saw a decline of -7 ticks, with the yield on 10-year T-notes increasing by +3.4 basis points to 4.617%. Although T-notes faced some losses, they managed to stay above Thursday’s seven-month low. Strength in European and Japanese bonds contributed to this decline, with 10-year German bunds falling to their lowest level in over a month.
European government bond yields also experienced gains, as the 10-year German bund yield climbed to 2.403%, closing up +7.3 basis points. The 10-year UK gilt yield rose to 4.645%, finishing the day up +5.8 basis points.
Swaps currently indicate a 100% likelihood of a -25 basis point rate cut by the ECB at its January 30 meeting, with a 12% chance for a more aggressive -50 basis point cut.
US Stock Movers
Mega-cap technology names saw significant declines, with Tesla (TSLA) leading the losses in the Nasdaq 100, dropping over -4%. Nvidia (NVDA) also fell by more than -2% in the Dow Jones. Other tech giants, including Microsoft (MSFT), Amazon.com (AMZN), Alphabet (GOOGL), and Apple (AAPL), each closed down by more than -1%.
In the cruise industry, Norwegian Cruise Line Holdings (NCLH), Carnival (CCL), and Royal Caribbean Cruises Ltd (RCL) each experienced declines of over -2% on Friday.
On the entertainment front, Netflix (NFLX) dropped more than -2% following mixed reviews for “Squid Game Season 2.” Insiders were active in selling at Crowdstrike Holdings (CRWD), pushing shares down by over -2%, while Broadcom (AVGO) also saw a similar decrease amidst insider sales.
KKR & Co (KKR) fell more than -1% after reports surfaced that the firm, along with Bain Capital, made bids exceeding $5 billion for non-core assets of Japan’s Seven & I. Fastenal (FAST) dropped more than -2% amid news that its CFO will resign in April.
Lamb Weston Holdings (LW) emerged as a standout, rising over +2% after Jana Partners LLC disclosed a new stake in the company. Defensive food-producing stocks saw gains, as companies like Hershey Co (HSY), Hormel Foods (HRL), Mondelez International (MDLZ), Kraft Heinz (KHC), Conagra Brands (CAG), and General Mills (GIS) each advanced by at least +0.3%.
Progyny (PGNY) surged over +15% due to insider buying, as evidenced by Executive Chairman Schlanger purchasing $2.2 million in shares. Amedisys (AMED) increased by over +4% after extending its timeline for a $3.3 billion acquisition by UnitedHealth Group.
VeriSign (VRSN) edged up +0.6% after Berkshire Hathaway purchased $28.5 million worth of the stock within the previous sessions.
Earnings Reports (12/30/2024)
Gencor Industries Inc (GENC) and Renovaro Inc (RENB).
The author, Rich Asplund, holds no positions in any of the mentioned securities. All data provided in this article is for informational purposes and should be verified against additional sources.
The views expressed here belong to the author and do not necessarily reflect those of Nasdaq, Inc.
