Market Mayhem: A Day of Reckoning for Tech Giants
The US market witnessed a dramatic turn of events on Monday, with the emergence of a cheap Chinese artificial intelligence rival, DeepSeek, sending shockwaves across Wall Street. The tech sector took a massive hit, with Nvidia’s market capitalization plummeting by over half a trillion dollars, making it the largest single-stock loss in history.
A Sea of Red: Tech Stocks Take a Beating
The tech-heavy Nasdaq index suffered its biggest loss of the year, dropping 3%, while the S&P 500 index also took a significant hit. Power companies, which were expected to benefit from the increased demand for energy-intensive data centers, surprisingly fell sharply, with Vistra and Constellation Energy dropping 28.3% and 20%, respectively.
A Silver Lining: Not All Doom and Gloom
Despite the chaos, some stocks managed to buck the trend. Apple, which reclaimed its position as the most valuable firm, rose 3% on Monday. Moreover, the equal-weighted S&P 500 index, which reduces the influence of megacaps, actually edged higher on the day, with 70% of its stocks rising.
Earnings Season: A Time for Reflection
The DeepSeek development has raised questions about the scale of investment spend in the AI sector, which will be scrutinized during the unfolding earnings season. With Microsoft, Tesla, and Meta set to report earnings on Tuesday, and Apple on Thursday, investors will be closely watching for signs of resilience in the tech sector.
Global Markets: A Mixed Bag
As mainland Chinese markets closed for the lunar new year holiday, the impact of the DeepSeek news was limited globally. Japanese stocks underperformed, while European markets reached a new intraday record, and Hong Kong stocks edged higher.
Interest Rates and the Dollar: A Volatile Ride
The tech wobble had a significant impact on US Treasury yields and Federal Reserve futures, with rate futures pricing in two rate cuts this year. The dollar also fell to new year lows before regaining ground on Tuesday.
Today’s Key Developments
Investors will be keeping a close eye on today’s economic data, including January consumer confidence readings, December durable goods orders, and November house prices. The US Federal Reserve’s Federal Open Market Committee will also begin its two-day meeting, while a slew of corporate earnings reports are due out.
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