**S&P 500 Index breaks below the 5,000-point psychological barrier
**Nasdaq Composite posts worst weekly performance in over a year and a half
**Nvidia's market value falls below two trillion dollars
Investors are concerned about tensions in the Middle East and the stickiness of inflation, while digesting the earnings reports of large tech stocks, leading to a divergence in U.S. stock market trends. By the close, the Dow Jones Industrial Average rose by 211.02 points, or 0.56%, to 37,986.40; the S&P 500 Index broke below the 5,000-point threshold, closing at 4,967.23, down 43.89 points or 0.88%; the Nasdaq Composite slid by 319.49 points, a drop of 2.05%, to 15,282.01.
Inflation concerns intensify, easing expectations cool down
Bill Northey, Chief Investment Officer at U.S. Bank Wealth Management, stated: "The market is struggling to digest many headwinds; the inflation issue is more severe than the market thinks, and even more serious than the Federal Reserve anticipates."
According to the latest financial stability report released by the Federal Reserve during the day, persistent inflation and high interest rates over the long term are seen by market participants and scholars as the greatest threat to financial stability. Additionally, geopolitical situations and the U.S. presidential election in November 2024 are also considered potential shock factors.
Easing expectations cool down, as economists and strategists bet that the Federal Reserve will not cut interest rates until at least September and are beginning to consider the possibility of no rate cuts at all within the year. Although U.S. Bank maintains its forecast for a rate cut in December, it also acknowledges a significant risk, namely that the Federal Reserve may not cut rates until as late as March 2025. The bank's economist, Stephen Juneau, said in a report: "We believe that initiating a rate-cutting cycle in June or September would make policymakers uneasy. The data-dependent Federal Reserve needs to face reality; inflation reports have consistently exceeded expectations since the beginning of the year, and considering the robust economic activity, it is not surprising that the urgency for easing has diminished."
The above situation dampens market sentiment, with both the S&P 500 Index and the Nasdaq Composite experiencing a six-day losing streak, marking the longest consecutive decline since October 2022. For the week, the S&P 500 Index fell by 3.1%, marking three consecutive weeks of declines; the Nasdaq Composite's weekly drop was 5.5%, the worst single-week performance since November 2022, with four consecutive weeks of losses, a first since January 2022.
Nvidia's market value falls below two trillion dollars.This year's rapidly rising chip stocks came under significant pressure during the day, dragging down the overall market performance. Nvidia fell by 10.0%, marking its largest single-day drop since March 2020, with its market value falling below two trillion dollars to $1.9 trillion. Arm plummeted by 16.9%, and AMD's semiconductor division saw a 5.4% decline.
Netflix, which reported its Q1 financial results the previous day, closed down by 9.1%, recording its largest single-day drop since January 2022. Despite exceeding expectations across all Q1 financial metrics, Netflix's forward guidance was poor, forecasting Q2 revenue of $9.49 billion, which is below the expected $9.51 billion. Additionally, the company announced that starting in 2025, it will no longer disclose quarterly subscriber numbers and average revenue per user metrics. In a letter to shareholders, Netflix stated that it hopes investors will evaluate the company's financial performance through metrics such as revenue, operating profit margin, free cash flow, and user viewing time. Analysts believe that while Netflix's efforts to restrict password sharing have had some success, the aforementioned move could imply that user growth may slow down next year.
Netflix is shifting its business focus from user growth to profit enhancement, aiming to increase revenue by raising prices, combating password sharing, and introducing an advertising plan. Investors are trying to understand from the financial report whether these efforts can drive Netflix's development and are seeking more details about the company's foray into video games.
Tesla closed down by 1.9% after announcing a recall of 3,878 electric pickup trucks, the Cybertruck. According to documents submitted to the National Highway Traffic Safety Administration (NHTSA), a fault in the vehicle's accelerator pedal could lead to unintended acceleration, increasing the risk of collisions. The company's after-sales service department will replace or repair the vehicles free of charge.
Next week, the market will be tested again by the financial reports of tech giants, with reports from Meta, Microsoft, and Google's parent company, Alphabet, all set to be released.
In terms of commodities, WTI crude oil futures closed up 0.5% at $83.14 a barrel on Friday, while Brent crude oil futures rose by 0.2%, settling at $87.29 a barrel. Traders believe that geopolitical tensions pose a limited risk to crude oil supplies, and since last Friday, US and Brent crude have cumulatively fallen by 3.0% and 3.4%, respectively.