The current state of the financial markets is characterized by significant turbulence, with the Dow Jones Industrial Average experiencing its longest losing streak since the late 1970s.
As of midday Tuesday, the index had dropped 200 points, marking a decline of 0.6% and pushing it towards its ninth consecutive loss. This downturn follows a peak on December 4, when the Dow reached an all-time high of 45,073. Since then, blue-chip stocks have fallen over 3%, raising concerns among investors about the sustainability of the current market rally.
Retail sales data for November showed a month-on-month increase of 0.7%, surpassing consensus expectations of 0.5%. However, when excluding automotive sales, the growth was only 0.2%, falling short of the anticipated 0.4%. This mixed economic data comes as the Federal Reserve convenes for a meeting, with traders anticipating a 97.4% probability of a 25 basis point interest rate cut. The Fed's decision, expected to be announced Wednesday, could further influence market sentiment and investor behavior.
The technology sector is under pressure, particularly with regards to Nvidia and its Blackwell chip systems. The company, a leader in artificial intelligence, saw its stock decline by 1.2% amid reports of severe thermal issues with its power chips. These concerns have raised questions about potential delays in mass production, which could impact Nvidia's sales, especially given its reliance on major clients like Microsoft.
On the other hand, Tesla has been performing well in the market, with shares rising nearly 1.5% and reaching record highs. The electric vehicle manufacturer is on track for its ninth gain in the last ten sessions, buoyed by an analyst's increased price target. This positive momentum in Tesla's stock highlights the ongoing investor interest in growth stocks, even as broader market indices struggle.
Investor sentiment is further complicated by concerns over inflation and potential trade conflicts. Some investors are worried that the trade agenda proposed by President-elect Donald Trump, which includes the possibility of new tariffs, could exacerbate inflationary pressures. This anxiety is reflected in the shifting outlook for market risks, with a growing belief that the tech sector may face a general weakening in valuations.
As the earnings season unfolds, several key companies are set to report their financial results, which could further influence market trends. Berkshire Hathaway is expected to release earnings for its holding in Heico, with shares showing signs of recovery. Homebuilder Lennar has seen its stock fall ahead of its earnings announcement. FedEx and Nike are also scheduled to report on Thursday, with FedEx currently in a consolidation phase and Nike testing its 50-day moving average. The performance of these companies will be critical in assessing the overall health of the market, particularly in sectors that have been under pressure.
In the broader market, small-cap stocks on the Russell 2000 index have declined, while the Innovator IBD 50 ETF has also dropped. Despite these challenges, the yield on the benchmark 10-year Treasury note has edged lower. Additionally, Bitcoin has seen a surge, recently surpassing the $107,500 mark, indicating a potential shift in investor interest towards cryptocurrencies amid traditional market volatility. The interplay of economic indicators, corporate earnings, and geopolitical developments will remain pivotal in shaping investor strategies and market outcomes.