Wall Street Today | Nvidia Fails to Keep Stock Market From Slipping
RECAP
Weighed Down by Tech
Stocks fell Friday, wiping out the weekly gains, weighed down by a sell-off in tech stocks that just recently propelled the major equity indexes to records. The bulls are retreating ahead of the US Federal Reserve meeting where policy makers are expected to release their latest projections on the path of interest rates.
The tech-heavy $Nasdaq Composite Index(.IXIC.US$ sustained the biggest blow, declining almost 1% to 15,973.17 as $NVIDIA(NVDA.US$ failed to hold on to gains. The $S&P 500 Index(.SPX.US$ fell 0.65% to 5,117.09 while $Dow Jones Industrial Average(.DJI.US$ lost 0.5% to end Friday at 38,714.77.
Sentiment is turning sour just as investors face the possibility that borrowing costs won't be declining as fast as they were expecting. Traders are now pricing in a 26% chance that interest rates will drop just 50 basis points by December, up from 9.5% a month ago, according to the CME FedWatch tool. That's bad news for companies looking to refinance their debt over the next 12 months.
Continued signs of weakness in the manufacturing sector are dousing hopes that the stock rally could widen well beyond the giant tech stocks that was fueled by the mania over artificial intelligence (AI).
MACRO
Manufacturing Still Shrinking
Economic activity in the manufacturing sector shrank contracted in February for a 16th straight month, the Institute for Supply Management said in a report. The Manufacturing Purchasing Managers' Index (PMI) showed a reading of 47.8%, down 1.3 percentage points from a month earlier, the ISM said. That missed economists' estimates that called for an expansion, according to MarketWatch.
In New York state, business activity continued to decline, with the Empire State Manufacturing Index slipping 19 points to minus 20.9, the Federal Reserve Bank of New York said in a press release. That's a deeper decline than the minus 6 reading expected by analysts surveyed by the Wall Street Journal.
Demand softened as new orders declined significantly, and shipments slid, the Empire State Manufacturing survey showed. Unfilled orders continued to shrink, while delivery times barely badged and inventories declined, the regional bank said.
SECTORS
Locking in Gains
Crude oil retreated as investors cashed in on gains from a recent rally that sent prices to a four-month high on Thursday after the International Energy Agency warned global inventories could tighten. The commodity is also getting a boost from geopolitical risk as violence in the Middle East, and Russia's war on Ukraine rage on.
Gold futures declined for a second day as the dollar appreciated, making the precious metal less attractive to investors who hold other currencies. Recent data that showed hotter-than-expected data is adding to anxiety that the US Federal Reserve may not start cutting interest rates as soon as the market is anticipating, curbing the appeal of the metal that doesn't pay holders any income.
COMPANIES
Against the Tide
Stocks linked to bitcoin held their ground, defying the negative sentiment that kept the cryptocurrency below $70,000. $Coinbase(COIN.US$ gained 3.7%, while $MicroStrategy(MSTR.US$ jumped 6.3%. $Marathon Digital(MARA.US$ rose almost 6%.
Adobe Painted Red
$Adobe(ADBE.US$ shares were engulfed by negative sentiment that made the stock the worst performer on the Nasdaq, after the company on Thursday gave fiscal second quarter guidance that trailed analysts' estimates. The company yesterday said it sees total revenue in the period ending on May 1 reaching $5.25 billion to $5.30 billion. That's lower than the $5.31 billion expected by analysts tracked by FactSet, according to a Dow Jones report.
Ulta Beauty Misses
$Ulta Beauty(ULTA.US$ shares tumbled after the specialty beauty retailer on Thursday reported earnings that missed analysts' estimates. The company's net profit for the fiscal fourth quarter ended Feb. 3 reached $394.4 million, or $8.08 a share. That's below the $7.53 earnings per share expected by analysts polled by FactSet, according to the Wall Street Journal.
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