A giant “sell the news moment?” #Semiconductors had their worst week since the pandemic as the #StockMarket gets stuck below its summer highs. Here are some key patterns and events to watch. $AVGO $NVDA $AAPLhttps://t.co/PoUKKtI1VC
— TradeStation (@TradeStation) September 9, 2024
The stock market experienced significant losses this week as investors responded to a weak August jobs report and a sell-off in leading technology stocks. The S&P 500 fell 1.73% on Friday, settling at 5,408.42, while the Nasdaq dropped 2.55% to close at 16,690.83. The Dow Jones Industrial Average also declined, falling 410.34 points, or 1.01%, to end at 40,345.41.
Not too much of a change lately in large speculators'/hedge funds' positioning in S&P 500 futures … still net short (albeit not as much as in 2023) pic.twitter.com/vEqEyfgDyu
— Liz Ann Sonders (@LizAnnSonders) September 9, 2024
“It’s a sentiment-driven move largely based on growth concerns,” said Emily Roland, co-chief investment strategist at John Hancock Investment Management. “The market is oscillating between whether bad news is actually bad or if it could spur more aggressive action from the Federal Reserve than markets anticipate.”
Megacap tech stocks saw considerable declines as investors dumped risk assets. Shares of companies like Apple fell 3.7%, while Nvidia slumped 4%.
Stocks To Watch | 📊Ready, set, trade! Keep an eye on these stocks as they set the market abuzz #StockMarket pic.twitter.com/NnWV1ThIKz
— ET NOW (@ETNOWlive) September 11, 2024
Semiconductor firms also faced declines, with AMD and Intel dropping about 4% each. The overall market decline was driven by fears about the health of the U.S. economy. Friday’s moves capped a rocky week for the equity markets.
The S&P 500 registered a 4.3% decline, its worst week since March 2023, while the Nasdaq shed 5.8%, its worst performance since 2022. The Dow slumped 2.9% for the week. New data for August’s jobs report fueled concerns about a slowing labor market.
Nonfarm payrolls grew less than expected, while the unemployment rate edged down to 4.2%, in line with expectations. “The market is looking for direction, and that will likely come from the Federal Reserve,” said Charles Ashley, portfolio manager at Catalyst Capital Advisors. Investors widely expect the Fed to cut rates by at least a quarter-percentage point at the conclusion of its policy meeting later this month.
However, softening labor market trends have led to increased bets that the central bank might opt for a larger cut. Traders remain split on whether the Fed will cut rates by a quarter- or half-percentage point.
Tech stocks drag down markets
The forthcoming artificial intelligence suite and integration into the latest iPhones could boost the growth of AI application development, according to TD Cowen. Analyst Krish Sankar noted that while on-device generative AI inferencing first appeared on Android and PC devices earlier this year, Apple’s software ecosystem could accelerate the development of these apps faster than competitors. Sankar emphasized that generative AI apps have the potential to significantly enhance end-user productivity.
U.S. crude oil prices hit their lowest level since June 2023, experiencing their worst week in nearly a year. Crude oil dropped to $67.17 earlier in the session and shed 8% for the week, while the Brent global benchmark fell 9.8%. The market’s decline is attributed to OPEC+ delaying plans to increase production by 180,000 barrels per day until December.
This delay coincides with slowing oil demand in China, the world’s largest crude importer. Charles Schwab issued an apology following technical issues that disrupted services on August 5. The brokerage firm stated it has conducted rigorous reviews and stress tests to prevent future occurrences.
“Nothing is more important to us than ensuring all our clients have a consistent and reliable experience,” a spokesperson said. Jeffrey Kleintop, global investment strategist at Charles Schwab, suggests that investors consider international equities for portfolio diversification. Kleintop noted the outperformance of non-U.S. stocks, particularly those in European, Canadian, and U.K. markets.
These stocks are seen as less exposed to the high-flying AI and tech stocks that dominated earlier in the year and are now being rotated out of. Goldman Sachs chief economist Jan Hatzius predicts the Federal Reserve will likely lower interest rates by 25 basis points at its upcoming September meeting. Hatzius anticipates three consecutive rate cuts of 25 basis points each by the end of the year.
While he acknowledges that there is a rationale for a 50-basis-point cut, he expects smaller cuts to be more probable. The financial markets continue to navigate through significant volatility, driven by economic data and expectations of Federal Reserve actions. Investors are closely monitoring developments to adjust their strategies accordingly.
