Everything to Know about Macro and Markets
The S&P 500 (SPX), Nasdaq Composite (NDAQ), and Nasdaq 100 (NDX) all fell on Friday to end their third consecutive week in the red. At the same time, the Dow Jones Industrial Average (DJIA) managed to eke out a minute gain, helped by financials and energy. The technology benchmarks logged their worst week since late 2022, while the S&P 500 closed its biggest weekly decline since March 2023.
A Tech Stock Rout
Markets tumbled as technology stocks dropped, with the AI hardware and semiconductor producers at the helm of the selloff, as cautious guidance from several industry leaders raised fears about AI-related chip demand.
These fears dragged down the Magnificent Seven stock-market leaders, which lost almost 8% in the past week and saw their collective capitalization drop by $950 billion, the largest value loss for the group on record. The three largest U.S. stocks – Microsoft (MSFT), Apple (AAPL), and Nvidia (NVDA) – were responsible for the lion’s share of the drop over the S&P 500 in the past week due to their immense weight in the index.
Traders pulled $21.1 billion from equity funds in the two-week period that ended on Wednesday, the largest redemptions since December 2022.
Valuations, Geopolitical Tensions, and Hawkish Fed
Federal Reserve officials have sounded increasingly hawkish in recent weeks, as the economy’s strength and sticky inflation dampened expectations for interest-rate cuts. Moreover, some policymakers voiced a possibility of a rate increase if consumer demand remains above the level needed to stamp out inflation, further depressing risk sentiment and fanning selling pressures.
As the expectations of an easing pivot tumbled, previously overlooked valuation imbalances and other risks have come to the forefront. After a year-and-a-half-long rally that lifted valuations to arguably unsustainable levels, investors have begun to question whether further exuberance is justified. These concerns added to brewing unease in the markets, with investor sentiment already being hit by a flare-up in the Middle East conflict, which is threatening to push up oil prices.
Notable Stock News
¤ Netflix’s (NFLX) slumped almost 11% as its revenue in the past quarter fell short of estimates, and after the streaming giant unexpectedly said it would stop publishing subscriber counts.
¤ Tesla (TSLA) lost 14% over the past week, taking its slide this year past 40% after it recalled thousands of its Cybertruck cars due to safety issues.
¤ Nvidia (NVDA) tumbled by 13.6%, its largest decline since 2022, as the semiconductor sector came under pressure. On Friday, the AI poster child registered the second-largest loss of value for any U.S. company on record (after META’s drop in 2022) and shed almost $300 billion over the past week.
¤ Super Micro Computer (SMCI) helped to drag down investor sentiment towards tech stocks, tumbling over 20%. The world’s leading AI server maker hasn’t provided preliminary results ahead of its earnings release, as it did in the previous quarter, raising investor fears amid jittery markets.
¤ ASML (ASML) and Taiwan Semiconductor (TSM) were also to blame for sparking the chip rout earlier in the week. The chipmaking equipment giant ASML fell short of sales expectations, which led to a weekly drop of almost 11%. ASML’s largest customer and the world’s leading chip foundry TSM lost over 10% despite beating earnings expectations and projecting strong AI chip demand, as it cut forecasts for semiconductor market growth this year.
¤ UnitedHealth (UNH) provided a bright spot in the markets this past week, soaring over 14% on better-than-expected earnings.
The Crucial Week Ahead
Investors are bracing for one of the busiest weeks of the year, with many mega- and large-caps scheduled to report their first-quarter earnings results. At the same time, the economic calendar features several releases that may affect the Federal Reserve’s policy stance. The Core PCE report, scheduled for Friday, is especially impactful in terms of further interest-rate decisions.
The decidedly weak market environment means that earnings reports from market-leading companies, specifically in the technology sector – which was the main reason for the rally up from October 2022 lows, as well as for April’s declines – will have an immense impact. The companies representing AI hardware and software, cloud computing, and other tech industries, can make or break the struggling rally with their reports and guidance.
Upcoming Earnings and Dividend Announcements
The Q1 2024 earnings season is in full swing, with a large number of newsworthy earnings releases scheduled for this week.
This week features earnings releases from several Magnificent Seven companies: Tesla (TSLA), Meta Platforms (META), Microsoft (MSFT), and Alphabet (GOOGL).
In addition, there is a slew of reports from economically important companies from all sectors, including Visa (V), PepsiCo (PEP), Merck & Company (MRK), Exxon Mobil (XOM), and AbbVie (ABBV). In addition, dozens of notable large caps, including Verizon (VZ), Lockheed Martin (LMT), IBM (IBM), ServiceNow (NOW), Caterpillar (CAT), Intel (INTC), Colgate-Palmolive (CL), are also scheduled to release their results this week.
Ex-Dividend dates are coming this week for Dell Technologies (DELL), Fastenal Company (FAST), Costco (COST), Bank of New York Mellon (BK), Albertsons Companies (ACI), Celanese (CE), and other dividend-paying firms.
For more exclusive market insights and content from TipRanks Macro & Markets research analyst Yulia Vaiman, click here.
