The Nasdaq Composite's (QQQ) recent slide, led by a downturn in technology megacaps and semiconductor companies, encapsulates the cautious stance of investors in the face of impending economic data and Federal Reserve decisions. This shift in market dynamics, marked notably by a decline in Apple Inc. and a broader weakening in the chip sector, preludes a significant week filled with economic revelations and Federal Reserve Chair Jerome Powell's testimony.
Tuesday's mixed economic data, highlighting a deceleration in the U.S. services sector paired with a rise in new orders to a six-month peak, paints a complex picture of the economy. This ambivalence is further compounded by a 525-basis point rise in interest rates since March 2022. Meanwhile, a report indicating a drop in new orders for U.S.-manufactured goods in January adds another layer of complexity to the market's outlook.
Market Overview:
-Wall Street closed lower on Tuesday, with the tech-heavy Nasdaq leading the decline.
-The Dow Jones Industrial Average fell 1.04%
-The S&P 500 lost 1.02%
-The Nasdaq Composite dropped 1.65%.
Key Points:
-Weakness in megacap growth companies like Apple (AAPL.O) weighed on the market.
-The chip sector was battered after news of a roadblock faced by Advanced Micro Devices (AMD) in selling an AI chip to China.
-Investors are awaiting remarks from Federal Reserve Chair Jerome Powell and key economic data releases, including the non-farm payrolls report, for guidance on the direction of the markets.
Looking Ahead:
-Investors will be watching Powell's testimony before lawmakers on Wednesday and -Thursday for clues about interest rate policy.
-The crucial non-farm payrolls report is due out on Friday.
Amidst this backdrop, the sell-off in technology stocks, specifically within the technology sector, is perceived by some strategists like Kevin Gordon of Charles Schwab (SCHW) as a blend of profit-taking and pre-emptive caution ahead of Powell's speech and impending labor market data. This cautious approach is mirrored in Apple's (AAPL) share performance, suffering a 24% year-on-year decline in iPhone sales in China due to heightened competition from local manufacturers like Huawei.
The semiconductor sector, too, faced challenges, exemplified by Advanced Micro Devices' struggles in the Chinese market amid U.S. export restrictions on advanced technology. This situation, reported by Bloomberg News, led to a sympathetic decline in the Philadelphia semiconductor index. Analyst Craig Fehr of Edward Jones interprets these movements as a natural breather in a market that has experienced a sharp ascent, a perspective that resonates with the Dow Jones (DIA) and S&P 500 (SPY) indices' performance.
