In the final hour of trading on Thursday, Wall Street suffered a large-scale sell-off. The reason was that the share price of semiconductor giant Nvidia (NVDA) dropped after it announced its earnings, and US President Donald Trump took more tariff-related measures, dampening market sentiment.
Trump confirmed that the proposal to impose a 25% tariff on imports from Mexico and Canada would be implemented on March 4. He also said that an additional 10% tariff would be imposed on Chinese goods.
The Nasdaq Composite Index (COMP:IND), which has a relatively high weighting of technology stocks, recorded its biggest one-day drop since January 27, falling by -2.8% to close at 18,544.42 points. The Nasdaq 100 Index (NDX), which has an even higher weighting of technology stocks, also declined by -2.8%. Bespoke Investment Group noted that this was the fastest decline of more than 5% from its all-time high for the latter since September 2020.
The benchmark S&P 500 index (SP500) closed down 1.6% at 5,861.58 points, while the blue-chip Dow Jones Industrial Average (DJI) closed down 0.5% at 43,239.19 points.
Scott Rubner, global markets managing director and tactical expert at Goldman Sachs, said that crowded markets and the fading of bargain hunting are bringing bearish trading to the US stock market.
In his “last optimistic email” for the first quarter of this year, Rubner said that the dynamics of capital demand are “changing rapidly and we are facing a seasonal negative growth” because “everyone is entering the capital pool (referring to Florida), including retail traders, 401k inflows, year-end allocation funds and enterprises.”
The one thing I’m most certain of is that the ability to generate large-scale alpha by buying on dips is starting to wane.
Foreign media agency analyst Tokic said: “Over the past three days, the S&P 500 index has been trying to stay above the 100-day moving average, a key technical support level. Today, it seems that this support level has been completely broken through.”
In the US Treasury market, the yield on the 10-year Treasury note (US10Y) rose by 2 basis points to 4.28%, while the yield on the 2-year Treasury note (US2Y) fell by 1 basis point to 4.07%.
At the close of trading on Wednesday, the major indexes on Wall Street also saw mixed performances.
Nvidia (NVDA) closed down 8.5%, despite reporting better-than-expected fourth-quarter results and providing a more optimistic outlook, partly driven by its Blackwell series of GPUs.
Tokic said, “Fundamentally, based on Nvidia’s performance, the growth story of Gen AI seems to have come to an end. Although Nvidia’s performance was good, it was not good enough to justify the bubble-like valuation.”
The economic calendar released on Thursday showed that durable goods orders in January ended a two-month decline and exceeded market expectations, while the second estimate of U.S. fourth-quarter GDP growth remained at +2.3%, in line with expectations.
The number of people filing for unemployment benefits for the first time reached its highest level in three months, at 242,000.
The sharp increase in initial jobless claims indicates that the labor market is weakening. Next week, tariffs on Mexico and Canada will take effect, and an additional 10% tariff on China will also be implemented. Overall, the stock market environment is very pessimistic, Tokic added.
