Key Takeaways
- Market Volatility Continues With Widespread Declines Across Major Indices
- Artificial Intelligence Stocks Face Significant Pressure Amid Tariff Concerns
- Uncertainty Over Trade Policies Creates Choppy Trading Environment
Stocks continued to be volatile on Thursday with the S&P 500 dropping 1.8%. Ten of the 11 sectors in the S&P were lower with energy being the one exception, gaining 0.5%. The Nasdaq Composite fared even worse, dropping 2.6% while the Russell 2000 and Dow Jones Industrial Average fell 1.5% and 1%, respectively. The weakness we’re seeing is widespread with the U.S. dollar also falling, closing at its lowest level since the election, capping off its worst four day stretch since 2022, according to The Wall Street Journal. We’ll see how the market ultimately digests today’s latest jobs report.
The enthusiasm over artificial intelligence that propelled much of the gains last year has been overshadowed by on again off again tariffs that the market is struggling to price in. AI stocks have been hit hard and some of Thursday’s worst performing stocks were AI-related. Palantir fell 11% and Marvell Technology dropped 20%. The Magnificent Seven, many of which have ties to AI, are down 10% on the year in aggregate. There was, however, some good news in AI Friday morning as Broadcom reported earnings that beat forecasts, and the company also issued an upbeat outlook. Shares of Broadcom are higher by 11% in premarket.
Whether you are pro- or anti-tariff, the market doesn’t like uncertainty and that is what is happening. Therefore, until we have a definitive policy, the choppy trading we’re seeing may continue. More and more companies are citing tariffs as a concern when reporting earnings as well. Costco, which reported Thursday, warned of tighter profit margins and a cautious consumer moving forward. That stock is down 2% premarket. Hewlett Packard Enterprises also cited tariffs and the effect on lower profit margins moving forward, sending that stock down 20% premarket.
One stock that reported good results was Gap Inc. That company beat on the top and bottom lines as new CEO Richard Dickson has helped turned the company around. I’ve always been fascinated by this company because it’s been on the ropes more than a few times but always seems to come back. The last stock I want to mention is Walgreens. While the company did not report earnings, Walgreens did announce Sycamore Partners will take it private in a deal valued at $10 billion. As recently as 2015, the company was valued at $106 billion.
Turning back to the major indices for a moment, I want to call out the 200-day moving average (DMA) in the S&P 500. Daily moving averages are watched by countless traders and the longer the duration of the average, the more important it may become. The S&P has touched its 200 DMA for three consecutive days. This is a lot like a massive bear jumping on a trampoline. Eventually, the trampoline tends to break. Therefore, this has me a bit concerned, especially when placed in the context of market uncertainty.
For today, I want to see how the market takes the jobs report. According to Bloomberg, forecasts were for 159,000 new jobs and an unemployment rate of 4%. The actual report showed 151,000 jobs and an unemployment rate of 4.1%. Markets have initially rallied on the news, but I think the immediate concern is uncertainty over tariffs. I would not be surprised if we saw a deleveraging as we head into the weekend. Volatility is still quite high with the VIX at 25, therefore, continued choppy trading could continue. I’ll also be watching the S&P 500’s 200 DMA. A break below 5,730 could mean more selling pressure. As always, I would stick with your investing plans and long-term objectives.
tastytrade, Inc. commentary for educational purposes only. This content is not, nor is intended to be, trading or investment advice or a recommendation that any investment product or strategy is suitable for any person.