Stock Market Update

[BRIEFING.COM] Today did not turn as envisioned when NVIDIA (NVDA 120.15, -11.13, -8.5%) was trading nearly 3.0% higher in pre-open action following its earnings report. Actually, it was a starkly disappointing day for a stock market that appears to be in a corrective phase that has canceled the success of buy-the-dip approaches and has fueled the unwinding of momentum trades. In turn, it is a corrective phase that has been triggered by inflation worries and growth concerns rooted in tariff proposals and efforts to cut government spending.

Those attributes were all on display today and were wrapped up in the following developments: 

• Disappointing price action in NVIDIA (NVDA 120.15, -11.13, -8.5%), which rolled over quickly after the start of trading
• President Trump's announcement that tariffs for Canada and Mexico will start March 4; and that an additional 10% tariff for China will go into effect the same day. That followed yesterday's indication that a 25% tariff for the EU will be announced soon. 
• Comments from Kansas City Fed President Schmid (FOMC voter), Cleveland Fed President Hammack (non-FOMC voter), and Philadelphia Fed President Harker (non-FOMC voter), all of whom in one way or another suggested the Fed isn't in a hurry to lower the fed funds rate
• Festering growth concerns, fueled by the jump in weekly initial jobless claims and the pending home sales index hitting a record low in January
• Month-end activity

The S&P 500, which climbed above 6,000 yesterday, fell below 5,900 today. The mega-cap cohort was mostly responsible for the setback, which turned into a broader affair when selling in the mega-cap space picked up in the afternoon trade. The Vanguard Mega-Cap Growth ETF (MGK) declined 2.6%.

That weakness undercut the market cap-weighted indices to a larger degree. The equal-weighted S&P 500 fell 0.9% today. Notably, the S&P 500 financial (+0.6%), energy (+0.5%), real estate (+0.4%), and consumer staples (+0.02%) sectors finished higher in a down tape painted by the overbearing brush stroke of the information technology sector (-3.8%), which is the market's most heavily-weighted sector.

The Nasdaq Composite for its part dropped 2.8% and is now down 8.1% from the all-time high it reached in December. The Russell 2000 was down 1.6% and is now down 13.3% from its November high.

The Philadelphia Semiconductor Index, feeling the weight of losses in NVIDIA and related stocks, plummeted 6.1% today and is now down 21.0% from the all-time high it hit in July, which puts it in bear market territory (generally defined as a pullback in excess of 20% from a prior high).

The Dow Jones Industrial Average had been up as many as 451 points, but finished comfortably below the unchanged line. It still holds a 1.6% gain for the year, but it stands alone among the major averages as a year-to-date winner. With today's loss, the market cap-weighted S&P 500 turned negative for the year (-0.3%), joining the Russell 2000 (-4.1%), Nasdaq (-4.0%), and the S&P Midcap 400 Index (-1.8%) in negative territory.

Reviewing today's economic data:

• Initial jobless claims for the week ending February 22 increased by 22,000 to 242,000 (Briefing.com consensus 220,000). Continuing jobless claims for the week ending February 15 were 1867K (prior revised to 1867K from 1869K)
  • The key takeaway from the report is that initial jobless claims reached their highest level since early December, which will add to the market's festering concerns about a slowdown in growth.
• The second estimate for Q4 GDP was 2.3% (Briefing.com consensus 2.3%; prior 2.3%) while the second estimate for the Q4 GDP Deflator was 2.4% (Briefing.com consensus 2.2%; prior 2.2%).
  • The key takeaway from the report is that the growth was driven largely by consumer spending and government spending, but with targeted efforts by the Trump administration to cut government spending and to implement tariffs, there will be concerns about GDP growth decelerating in coming quarters due to less of a contribution from consumer spending and government spending.
• January Durable Goods Orders were up 3.1% (Briefing.com consensus 1.8%; prior revised to -1.8% from -2.2%). Excluding transportation, durable goods orders were flat (Briefing.com consensus 0.4%; prior revised to 0.1% from 0.3%).
  • The key takeaway from the report is that nondefense capital goods orders, excluding aircraft -- a proxy for business spending -- logged a healthy 0.8% increase in January, offsetting the headline disappointment of an unchanged reading for durable goods orders, excluding transportation.
• January Pending Home Sales declined 4.6% (Briefing.com consensus -0.8%) following an upwardly revised 4.1% decline (from -5.5%) in December.
  • The key takeaway from the report is that pending home sales hit their lowest level on record going back to 2001.

Friday's economic calendar includes:

• January Personal Income (Briefing.com consensus 0.3%; prior 0.4%), Personal Spending (Briefing.com consensus 0.2%; prior 0.7%), PCE Price Index (Briefing.com consensus 0.3%; prior 0.3%), and Core-PCE Price Index (Briefing.com consensus 0.3%; prior 0.2%)
• January Adv. Intl. Trade in Goods (prior -$122.1B), Adv. Retail Inventories (prior -0.3%), and Adv. Wholesale Inventories (prior -0.5%)
• February Chicago PMI (Briefing.com consensus 41.2; prior 39.5)