Market Update

The S&P 500 Index saw a drop, with the Dow Jones Industrial Average ending down 1.57% and the Nasdaq 100 Index down 2.04%. March E-mini S&P futures fell by 1.55%, while March E-mini NASDAQ futures decreased by 2.02%. Thursday’s trading began with some gains but shifted sharply downward, primarily due to the decline of major tech stocks known as the “Magnificent Seven.” Cisco Systems, in particular, saw more than a 12% decline after it warned that increasing memory chip prices may affect its profitability. Trucking and logistics companies also struggled amidst concerns about AI impacting future earnings.

Meanwhile, lower bond yields provided some support for stocks. The 10-year T-note yield dropped to 4.10%, marking a 2.25-month low, following a report that new jobless claims were lower than expected and existing home sales in January fell to a 16-month low.

New weekly jobless claims in the U.S. decreased by 5,000 to a total of 227,000, slightly above the expected 223,000. Existing home sales recorded a notable drop of 8.4%, landing at 3.91 million, also falling short of the anticipated 4.5 million.

Looking ahead, the market is poised to focus on corporate earnings and economic indicators. The January CPI is expected to rise by 2.5% year-over-year, while core CPI is also projected to increase by the same percentage.

As the fourth-quarter earnings season continues, it’s reported that over two-thirds of S&P 500 companies have reported their earnings. Surprisingly, 76% of the 358 companies surpassed expectations, and according to Bloomberg Intelligence, fourth-quarter earnings growth for the S&P is expected to hit 8.4%, continuing a ten-quarter streak of year-over-year increases. Excluding the major tech stocks, Q4 earnings growth is estimated to be around 4.6%.

Market analysts currently estimate a 9% likelihood of a 25 basis point rate cut in the upcoming policy meeting scheduled for March 17-18.

International stock markets had a mixed day on Thursday, with the Euro Stoxx 50 declining by 0.40% from a recent all-time high. China’s Shanghai Composite rose slightly by 0.05%, and Japan’s Nikkei Stock Average closed down 0.02% after also reaching an all-time high.

The March T Note closed up 16.5 ticks, with the 10-year T-note yield dropping by 6.8 basis points to 4.104%. T-notes saw a rise, reaching a 1.75-month high, driven by lower-than-expected jobless claims and disappointing home sales. This trend of T-notes rising continued as stock prices fell, leading to increased demand for government bonds. The Treasury Department’s recent auction of $25 billion in 30-year T-notes received strong interest, with a bidding ratio of 2.66, much higher than the average of 2.37.

In Europe, government bond yields fell, with Germany’s 10-year bonds closing at 2.779%, their lowest in 2.25 months, while the UK 10-year bond yield reached its lowest level in three weeks, closing at 4.452%.

In terms of the UK economy, Q4 GDP grew by just 0.1% quarter-over-quarter and 1.0% year-over-year, both below expectations. Manufacturing production in the UK also slid by 0.5% month-on-month in December, not meeting the projected decline of 0.1%.

Market sentiment about the European Central Bank cutting rates by 25 basis points at its next meeting on March 19 is now considered to be down by 3 percentage points.

On Thursday, the tech stocks in the Magnificent Seven faced a significant sell-off, impacting the market. Apple saw a decline of over 5%, while Amazon, Meta Platforms, and Tesla all fell by more than 2%. NVIDIA, Microsoft, and Alphabet closed slightly down but still noticeably lower.

Concerns about AI’s impact on trucking and logistics led to sharp declines in those sectors. Companies like Landstar Systems fell by over 15%, while CH Robinson experienced a drop of over 14%. Other major players in the logistics space also saw considerable declines.

Stocks linked to cryptocurrencies also faced losses, coinciding with Bitcoin’s drop of over 3%. Coinbase fell more than 7%, with similar declines for other crypto-related stocks.

In a more dramatic development, ICON Plc saw its shares plunge more than 39% after an internal investigation revealed potential overstated revenues. Baxter International similarly dropped over 15% after announcing expectations of flat sales growth.

In contrast, Tyler Technologies fell more than 15% as their quarterly revenue figures fell short of expectations. Cisco led the Dow’s declines, dropping over 12% after adjustments revealed lower-than-expected profit margins.

Some companies did report more positive news, like Cognex, which soared over 37% after their quarterly revenue exceeded expectations. Equinix led the S&P 500 with a more than 10% increase, forecasting strong EBITDA for the year ahead.

Other notable gains included Motorola Solutions, which closed up over 7% after reporting better-than-expected earnings, and Viking Therapeutics, which rose likewise after plans for a significant obesity treatment advancement.

This week will continue to unfold with several financial reports anticipated from various corporations.