[New York Stock Market] Rally Fatigue, Decline Due to Apple and Tesla Negative News... Nasdaq Down 1.65%

Apple·Tesla Decline on Weak China Sales
Bitcoin Surges Past $69,000 to Record High
Awaiting Powell's Remarks and February Jobs Report

The three major indices of the U.S. New York stock market all closed lower on the 5th (local time) due to accumulated fatigue from the recent rally and weakness in tech stocks such as Apple and Tesla. The market is giving back the gains made so far and is awaiting the upcoming remarks from Federal Reserve (Fed) Chair Jerome Powell and the February employment report scheduled for this week.

[Image source=Yonhap News]

On the day at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average closed at 38,585.19, down 404.64 points (1.04%) from the previous trading day. The large-cap S&P 500 index fell 52.3 points (1.02%) to 5,078.65, and the Nasdaq index dropped 267.92 points (1.65%) to 15,939.59.

Negative news in tech stocks piled up simultaneously, weighing on the market. Apple fell 2.84% due to sluggish iPhone sales in China. This followed a fine of 1.84 billion euros (approximately 2.67 trillion KRW) imposed by the European Union (EU) Commission for antitrust violations, marking two consecutive days of bad news. Tesla also dropped 3.93% amid reports of reduced shipments from its China factory and a halt in operations at its German plant. Microsoft (MS) and Netflix declined 2.96% and 2.81%, respectively. U.S. semiconductor company AMD fell initially on news of AI semiconductor sales restrictions to China but narrowed losses to close down 0.11%. Target surged 12.02% after reporting earnings that exceeded market expectations. AeroVironment also soared 27.94% on better-than-expected earnings and positive future outlook.

Bitcoin, the leading cryptocurrency, surpassed $69,000, reaching an all-time high for the first time in 2 years and 4 months since November 2021. The listing of a Bitcoin spot exchange-traded fund (ETF) led to a large inflow of funds, driving the price up. Bitcoin's price rose to around $69,300 during the day but fell back to approximately $63,133.9 as of 4:14 PM.

The market is closely watching the future movements of big tech companies that led the decline in the New York stock market on the day. Opinions are divided on whether they will overcome concerns about peak valuations and continue the rally or fall due to valuation pressures.

Kenny Polcari, strategist at Slatestone Wealth, said, "Trees cannot grow to the sky," diagnosing that "some investors have begun to worry whether tech stocks can live up to the very high valuations assigned to them in the market."

The U.S. service sector, announced on the day, continued its expansion. The February service Purchasing Managers' Index (PMI) released by S&P Global recorded 52.3. Although it was slightly below the previous month’s 52.5, it exceeded market expectations of 51.3 and remained above 50, indicating continued expansion.

Investors are focusing on the message from Chair Powell, who will testify before the U.S. Congress on the 6th and 7th to report on monetary policy. Powell is expected to reiterate a cautious stance, emphasizing that he will not rush to cut interest rates. The previous day, Raphael Bostic, President of the Federal Reserve Bank of Atlanta, also expressed a hawkish (monetary tightening preference) stance. Bostic predicted that the Fed would cut rates for the first time in the third quarter of this year and then pause the cuts. He expected the total rate cuts to amount to 0.5 percentage points over two occasions by the end of the year.

Kenneth Brooks, strategist at Soci?t? G?n?rale, commented, "If Bostic wants one cut and a pause, I wonder if the Fed is hesitating to make three cuts," adding, "The data is speaking, and it is not calling for the Fed to cut rates."

Investors are also paying attention to the February employment report to be released by the U.S. Department of Labor on the 8th. The market expects nonfarm payrolls to increase by 200,000 last month, significantly down from January’s 353,000. January’s nonfarm payrolls exceeded the forecast of 185,000 by nearly double, confirming an overheated labor market, so the key question is whether the slowdown will appear in February. The unemployment rate for February is expected to remain steady at 3.7%, the same as January.

Prior to that, on the 6th, the U.S. Department of Labor will release the January Job Openings and Labor Turnover Survey (JOLTS), and private employment data firm ADP will release February nonfarm payroll figures. The number of job openings in U.S. companies is expected to have decreased from 9.026 million in December last year to 8.895 million in January this year.

Government bond yields are falling. The U.S. 10-year Treasury yield, a global bond yield benchmark, dropped 8 basis points (1 bp = 0.01 percentage points) to 4.13%, while the 2-year Treasury yield, sensitive to monetary policy, fell 5 basis points to around 4.55%.

International oil prices are weak. West Texas Intermediate (WTI) crude fell $0.59 (0.8%) to $78.15 per barrel, and Brent crude dropped $0.76 (0.9%) to $82.04 per barrel. China’s announcement the previous day of an economic growth target of 5.0% for this year, which met expectations without any 'surprise,' has contributed to the decline in oil prices.