U.S. stocks experienced a slight downturn in trading ahead of upcoming economic data releases, following last week’s surge fueled by Nvidia’s impressive performance. The S&P 500 declined by 0.4%, while the Dow Jones Industrial Average dropped approximately 62 points, or 0.2%, despite both indices achieving record highs on Friday. The Nasdaq Composite, which is heavily weighted toward technology stocks, saw a modest decrease of 0.1%. Despite this, all three indexes are poised to conclude February with gains for the fourth consecutive month. The previous week saw them each rising by more than 1% following Nvidia’s stellar earnings report, which reignited enthusiasm for artificial intelligence technology.
On Monday, however, there was no significant catalyst driving market movement. Nvidia shares continued their upward trend with a 0.3% increase after surging by 17% over the preceding two trading sessions. Conversely, several other prominent technology stocks faced declines, including a 0.7% drop for Apple and a 4.4% slide for Google-parent Alphabet.
The performance across other sectors was mixed. Shares in Berkshire Hathaway initially showed strength but ultimately ended the day down by 1.9%. Warren Buffett’s annual letter released over the weekend disclosed $8 billion in gains from investments in Japanese stocks but highlighted a scarcity of potential acquisition opportunities.
In contrast, Domino’s Pizza witnessed a notable increase of 5.8% following its announcement of better-than-expected profits and a dividend raise.
Investors are eagerly awaiting Thursday’s release of economic data by the Commerce Department, which will provide valuable insights into household spending, income, and the Federal Reserve’s preferred inflation gauge.
Analysts anticipate that the data will confirm an uptick in price pressures during January, following a period of moderation in previous months. Recent reports on consumer and producer prices have already revealed unexpectedly high inflation levels at the beginning of the year. This unexpected inflation surge has disrupted investors’ expectations regarding the timing of potential interest rate cuts by the Federal Reserve in 2024.
Despite these inflation concerns, investors have not displayed significant alarm. Many are optimistic that the elevated inflation readings from January will be temporary aberrations. Moreover, other economic indicators have been generally positive, with businesses continuing to add jobs and economic growth maintaining momentum without significant signs of slowdown.
There are positive indications beyond the realm of tech giants in the stock market. According to a Dow Jones Market Data analysis of FactSet data, as of Friday, 171 stocks within the S&P 500 had outperformed the index this year. Remarkably, these stocks collectively represent over 50% of the index’s market weight.
Michael Antonelli, a market strategist at Baird, interprets this as a signal that the market is not currently experiencing an artificial intelligence-driven bubble. He attributes the market’s strength to the robust state of the economy, suggesting that this straightforward explanation may be overlooked.
Year-to-date, the S&P 500 has gained 6.3%, reflecting overall positive market performance.
In other market developments, declining bond prices have led to an increase in the yield on the benchmark 10-year U.S. Treasury note, rising to 4.298% from 4.258% on Friday. While the 10-year yield began February slightly below 4%, it has climbed in response to stronger-than-expected jobs and inflation data, although it remains below the 5% level seen last fall.
Internationally, Japanese stocks achieved another record high, driven by merger discussions between two drugstore operators and favorable mentions from Warren Buffett in his letter. Conversely, stock indexes experienced mostly negative movements in Europe and China.