The markets are trading decidedly lower on Friday, including tech stocks, reversing course from yesterday’s impressive performance. All three major indices spiraled lower by nearly 1%, including a 300-point drop in the Dow Jones Industrial Average.
But all eyes are on the Nasdaq after tech stocks buoyed the index to a new high on Thursday, climbing nearly 2% to the 16,444 area. That was its sixth record of the year amid a modest 0.2% gain in wholesale prices last month.
Big Tech stocks, which have been riding the artificial intelligence (AI) wave this year, lifted the mood yesterday, with shares of Nvidia (Nasdaq: NVDA) and Apple (Nasdaq: AAPL) both soaring over 4% while Amazon (Nasdaq: AMZN) achieved a fresh all-time high. But those gains have been erased in a whip-saw week that is set to end on a sour note, despite weekly gains.
What a difference a day makes. It’s earnings season, and investors are choosing to see the glass half empty in today’s session, taking their cue from chip stocks and major banks as worries around inflation and other headwinds outweigh any optimism.
Investors were spooked by this week’s hotter-than-expected inflation data after last month’s CPI came in at 3.5%, calling into question the Fed’s next steps on interest rates. Meanwhile, the economy is humming along, including a robust labor market, as evidenced by over 300,000 jobs added in March coupled with an unemployment rate below 4%.
Tech Tumble
Nvidia, which has gained a reputation as a darling among tech investors, can’t seem to get out of its own way of late. The stock is trading below the $900 threshold and is down nearly 2% on the day. While shares are still up year-to-date, growth investors have surely signed up for a roller-coaster ride on this AI play, which has tumbled 6% since March 25.
Today’s declines could be chalked up to China, which is reportedly looking to eliminate foreign chipmakers from its telecommunications infrastructure. While the decision takes aim at Intel (Nasdaq: INTC) directly, other chipmakers including Nvidia and Advanced Micro Devices (Nasdaq: AMD) are falling in sympathy.
While many believe the sky’s the limit for NVDA shares, some Wall Street analysts have turned more cautious, including DA Davidson’s Gil Luria, who according to CNBC believes the stock price should be more than halved to $410.
Last year at this time, Nvidia in its Q1 earnings report set off a firestorm on AI, a trend that isn’t likely to subside anytime soon. Nvidia and CEO Jensen Huang are set to report this year’s Q1 results in May.
Earnings Angst
Finally, JPMorgan (NYSE: JPM), whose CEO Jamie Dimon has been known to rattle investors, is also contributing to the down day after reporting quarterly earnings. While Q1 profits and revenue surpassed consensus estimates, investors are fixated on guidance and were let down by flat interest income expectations of $90 billion in this elevated interest rate environment.
Dimon said the bank remains “alert to a number of significant uncertain forces,” not least being geopolitical uncertainty and inflation.
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