TLDR
- US stocks erased early gains with S&P 500 falling below 6,000 and tech stocks leading the decline
- Microsoft shares dropped 2% after reports of data center lease cancellations, raising AI capacity concerns
- Investors are cautious ahead of Nvidia’s earnings report on Wednesday
- Apple pledged to spend $500 billion in the US amid tariff concerns
- Key economic data including PCE inflation index (Fed’s preferred measure) due later this week
The US stock market retreated from early gains on Monday as technology stocks led a broader market decline.
The slide comes ahead of chipmaker Nvidia’s eagerly awaited earnings report scheduled for Wednesday and amid growing concerns about President Trump’s trade policies.
The Dow Jones Industrial Average hovered near the flatline, trading at 43,461.59, up just 0.08% after experiencing its worst week since October. Meanwhile, the S&P 500 fell 0.3% to 0.6%, breaking below the 6,000 level. The tech-heavy Nasdaq Composite dropped 0.9%, with the Nasdaq 100 falling even further at 1.1%.
Monday’s retreat follows a difficult previous week for US equities. Last week was marked by data showing increasing concerns from American consumers and businesses about President Trump’s proposed tariff plans, which culminated in steep declines on Friday.
Microsoft
Microsoft emerged as one of the day’s biggest losers, with shares dropping about 2% after an analyst report from TD Cowen revealed the software giant has canceled some leases for US data center capacity. This news raised broader questions about whether large tech companies might be securing more AI computing capacity than they actually need in the long term.
Nvidia shares, which had gained as much as 2% in early trading, reversed course to trade more than 1% lower. The AI chipmaker’s upcoming earnings report on Wednesday represents the highlight of the week for market watchers. Investors will be closely monitoring how well Nvidia is navigating the looming threat of Trump’s tariffs and competition from lower-cost alternatives like China-based DeepSeek.
Tesla also contributed to the tech sector’s troubles, with shares of the electric vehicle manufacturer dropping 3% during the session.
In contrast to the broader tech weakness, Apple’s stock inched higher after the company announced plans to spend and invest $500 billion in the United States. This move comes as Apple seeks relief from President Trump’s tariffs on goods imported from China. As part of this initiative, Apple stated it will hire 20,000 new workers and produce AI servers domestically.
Beyond tech companies, several other corporate developments made headlines. Starbucks announced the elimination of 1,100 corporate jobs in a move aimed at increasing efficiency. Domino’s Pizza reported lower-than-expected US sales growth in the fourth quarter, highlighting challenges in appealing to budget-conscious American consumers.
Berkshire Hathaway provided a bright spot, reporting a 71% surge in operating earnings for the fourth quarter. The conglomerate benefited from higher interest rates boosting investment income and improvements in its insurance business.
Some Wall Street strategists remain optimistic about the medium-term outlook for US equities. Morgan Stanley strategist Michael Wilson, who had maintained a bearish stance on US stocks until mid-2024, now expects capital to return to US markets. Wilson described the S&P 500 as “the highest quality index” with “the best earnings growth prospects.”
Similarly, JPMorgan Chase strategist Mislav Matejka suggested that US earnings growth would need to significantly underperform the rest of the world to justify an outright bearish view on American markets.
This Week
The week ahead features several key economic reports that could influence market direction. Friday brings the January report for the Personal Consumption Expenditure (PCE) index, which serves as the Federal Reserve’s preferred measure for inflation.
Other important economic data expected this week include reports on US GDP, housing market conditions, and consumer confidence. These reports will be closely scrutinized for clues about the health of the US economy and potential Federal Reserve policy moves.
The cryptocurrency market also showed weakness on Monday, with Bitcoin falling 1.6% to around $94,226 and Ether dropping more sharply by 5.7% to $2,648.
In the bond market, the yield on 10-year Treasury notes declined by two basis points to 4.41%. Currency markets remained relatively stable, with the Bloomberg Dollar Spot Index showing little change.
Oil prices showed modest strength, with West Texas Intermediate crude rising 0.5% to $70.76 per barrel, while gold prices remained essentially unchanged.
Market volatility could increase in the coming days as Nvidia’s earnings report on Wednesday may trigger significant market movements. The US benchmark has gone 35 sessions without posting consecutive declines of more than 1% — its longest such streak since late December, according to data compiled by Bloomberg.
