Market Roller Coaster: Tech Turmoil and Economic Woes

The Stock Market Roller Coaster: Nvidia, Economic Data, and Tech Sector Fluctuations

The S&P 500 and Nasdaq showed a decline on Thursday, as Nvidia's shares closed with losses and economic data indicated a slowdown in the U.S. economy. The tech sector led the downturn as investors focused on rising expenses in the AI industry and economic prospects. Nvidia, which became a prominent figure of the day, lost 2.7% after early gains, contrasting with the massive jumps following previous results. While the company provided an optimistic revenue forecast, its gross margin forecast for the first quarter fell short of expectations.

A Tough Day for the Tech Sector

In addition to Nvidia, other chip manufacturers like Broadcom and Advanced Micro Devices also showed declines, with the broader chip index dropping 2%. Five out of the 11 sectors in the S&P 500 ended in the red, led by a 1.2% drop in technology stocks. Many of the largest tech giants also closed with losses, including Alphabet and Meta, who are among Nvidia's biggest clients.

Ross Mayfield, Baird's investment strategist, noted that Nvidia faces very high expectations to elicit any significant positive reaction to its stock. The low-cost AI models introduced by China's DeepSeek in January cooled off the tech-driven bull market that has been ongoing for two years, with Nvidia losing half a trillion dollars in market value in a single day. Concerns about excess capacity were further fueled by news that Microsoft had given up some data center leases.

Economic Data and Political Challenges

The economic data that came in during the day did not help investor sentiment. The number of new unemployment claims was 242,000, higher than the expected 221,000. This figure, along with several other economic indicators received in the past week, suggests that the U.S. economy is slowing down. Growth concerns have already emerged in the markets, with the S&P 500, Dow Jones, and Nasdaq poised for monthly losses.

The slowdown in economic growth in the fourth quarter and the continued loss of momentum at the beginning of the first quarter are putting additional pressure on the markets. The latest trade threats by U.S. President Donald Trump did not help the situation: he proposed 25% "reciprocal" tariffs on European cars and other goods and confirmed that tariffs planned for Mexico and Canada would take effect on March 4.

The Fed and Inflation Data

Attention is now turning to the monthly data on personal consumption expenditures (PCE), which are the Federal Reserve's preferred inflation indicators. This data will be released on Friday. Traders suggest that the Fed may cut borrowing costs by at least 50 basis points by December, adding further uncertainty to the markets.

Other Players on the Market

Salesforce lost 4.1% after its revenue forecast for the 2026 fiscal year fell short of expectations. In contrast, Snowflake jumped 9% after its product revenue forecast for 2026 exceeded estimates. Viatris plummeted 15.7% after the pharmaceutical company forecast disappointing annual results, while Warner Bros Discovery surged 5.4% after announcing it could double its streaming profits this year.

Summary

The trading day was characterized by the tech sector's sluggish performance and the uncertainty stirred up by economic data. The decline of Nvidia and other tech giants, along with signs of economic slowdown, exerted additional pressure on the markets. Investors are now waiting for the Fed's next steps and inflation data, which may decisively influence next week's market sentiment. Amidst the uncertainty, diversification and adherence to long-term strategies remain the wisest choices.