Fri, February 07, 2025

US Stocks Drop as Inflation Report Shows First Fall Since 2020

Акции достигают рекордных максимумов на фоне снижения инфляции в 2024 году

Quick Look:

  • US stocks dropped as inflation reports revealed a decline in consumer prices for the first time since 2020.
  • The S&P 500 fell 0.9%, the Dow Jones increased slightly by 0.1%, and the Nasdaq Composite sank almost 2%.
  • Tech stocks, especially Nvidia and Tesla, saw significant declines, with Tesla’s 11-day winning streak ending.

In a surprising turn, US stocks took a downturn on Thursday as investors reacted to a critical inflation report. This report showed that consumer prices had fallen month over month for the first time since 2020. As a result, the stock market saw significant shifts, particularly within the tech sector.

The Indices Overview

The S&P 500 (GSPC) experienced a 0.9% drop, falling below the 5,600 mark after crossing it for the first time just a day earlier. The Dow Jones Industrial Average (DJI) managed a slight increase of nearly 0.1%, providing a small glimmer of stability amidst the broader market turbulence. However, the Nasdaq Composite (IXIC), heavily weighted with technology stocks, led the decline, sinking almost 2%.

Tech Sector Takes a Hit

Extensive Tech stocks bore the brunt of this market adjustment. Nvidia (NVDA), a leading player in the sector, saw its shares plummet by over 5%. The broader “Magnificent 7” group of tech stocks had its worst trading day in nearly a year. Tesla (TSLA), often seen as a barometer for tech market sentiment, snapped an impressive 11-day winning streak, dropping more than 8%. This was Tesla’s most significant single-day drop since January, triggered by a Bloomberg report indicating that the company would delay unveiling its highly anticipated robotaxi.

Sector Rotation in Full Swing

With tech stocks faltering, investors quickly rotated into more rate-sensitive sectors. Real Estate (XLRE) and Utilities (XLU) sectors gained favour among investors. This shift was prompted by June’s cooler-than-expected inflation figures, providing hope for stability in these traditionally safer sectors. The June Consumer Price Index (CPI) showed a 0.1% decline over the previous month and a modest 3.0% increase over the past year, marking the slowest annual rise in consumer prices since early 2021.

Inflation Insights and Market Reactions

The unexpected decline in consumer prices has a ripple effect on market expectations. Earlier in the week, stock gains had been fueled by comments from Federal Reserve Chair Jerome Powell, suggesting that the conditions were nearly ripe for the Federal Reserve to begin cutting interest rates. Thursday’s inflation data further bolstered the market’s optimism, with around 90% of traders anticipating an interest-rate cut by September, according to the CME FedWatch tool.

The Road Ahead: Earnings Season Kick-Off

As investors digest the recent inflation report and its implications, attention is shifting to the upcoming earnings season. Major financial institutions, including JPMorgan Chase (JPM), Wells Fargo (WFC), and Citigroup (C), are set to report their second-quarter results on Friday. These reports will provide further insights into the financial sector’s health and potentially set the tone for market movements in the coming weeks.

A Market in Transition

Recent market activity underscores the stock market’s ongoing volatility and shifting dynamics. As investors navigate inflation surprises, sector rotations, and the upcoming earnings season, the landscape remains as unpredictable as ever. While tech stocks have taken a hit, the broader market continues to adapt, highlighting the ever-evolving nature of financial markets. The coming days will be crucial in determining whether the recent trends will solidify or if further surprises lie ahead.

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