[New York Stock Market] Decline Due to Trump Tariff Threat and Nvidia Plunge... Nasdaq Down 2.78%

Trump Announces Additional 10% Tariff on China
Nvidia Plunges Over 8% Despite Surprise Earnings
Tech Stocks Slide as Investor Sentiment Weakens
New Unemployment Claims Reach 242,000, Exceeding Expectations
Q4 GDP Growth Rate Remains Solid at 2.3%

The three major indices of the U.S. New York Stock Exchange all closed lower on the 27th (local time). Investor caution over the trade war increased as U.S. President Donald Trump expressed his intention to impose tariffs on China, Mexico, and Canada. Despite Nvidia, the leading AI stock, announcing 'surprise earnings' the previous day, it plunged more than 8%, leading to weak sentiment in technology stocks.

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On this day in the New York stock market, the Dow Jones Industrial Average, centered on blue-chip stocks, closed at 43,239.5, down 193.62 points (0.45%) from the previous trading day. The S&P 500, focused on large-cap stocks, fell 94.49 points (1.59%) to 5,861.57, and the tech-heavy Nasdaq dropped sharply by 530.84 points (2.78%) to 18,544.42. The major indices fluctuated throughout the morning but all declined in the afternoon, widening their losses.

By stock, Nvidia plunged 8.48%. Although Nvidia reported fourth-quarter sales and net income exceeding expectations the previous day, investors responded indifferently as market expectations had already been raised significantly. Other technology stocks also showed broad weakness. Apple fell 1.27%, Microsoft (MS) dropped 1.8%, Alphabet, Google's parent company, and Tesla declined 2.57% and 3.04%, respectively.

Matt Mele, Chief Market Strategist at Miller Tabak, diagnosed, "Nvidia's earnings were good, but it did not alleviate fears that AI market profits may not be as strong as investors had thought."

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Investors were cautious about President Trump's tariff remarks in the morning. Through his social networking service (SNS) Truth Social, he stated that the 25% tariffs scheduled to take effect on March 4 for Mexico and Canada "will actually be implemented as planned," and that China will also face an additional 10% tariff on that day. Earlier, President Trump announced on February 4 the imposition of 25% tariffs on Mexico and Canada and an additional 10% tariff on China due to issues related to drug and illegal immigration inflows. Subsequently, the tariffs on Mexico and Canada were postponed for one month, while the tariff measures on China were implemented as scheduled. Regarding China, he indicated plans to raise the tariff by an additional 10%, imposing a total of 20% additional tariffs.

Jay Hatfield, CEO of Infrastructure Capital Advisors, analyzed, "We are in a somewhat stagnant and limited, somewhat irrational market while waiting for policy clarity."

Employment data also weighed on investor sentiment. According to the U.S. Department of Labor on this day, new unemployment claims for the week of February 16-22 totaled 242,000, an increase of 22,000 from the revised figure of 220,000 the previous week. This was the highest level since October last year and 20,000 more than the expert forecast of 222,000. As the second Trump administration undertook federal government restructuring, unemployment claims in Washington D.C. rose to the highest level in 1 year and 11 months since March 2023.

However, separate from unemployment claims, economic growth remained robust. According to the U.S. Bureau of Economic Analysis (BEA) on this day, the preliminary estimate of the U.S. real Gross Domestic Product (GDP) growth rate for the fourth quarter of last year was 2.3% annualized compared to the previous quarter. This matched the flash estimate and market expectations (both 2.3%) announced last month and significantly exceeded the U.S. potential growth rate, estimated to be in the high 1% range. Personal consumption expenditures increased by 4.2% quarter-on-quarter, driving a solid recovery. Inflation was revised upward, raising concerns about a price rebound. The core Personal Consumption Expenditures (PCE) price index rose 2.7% in the fourth quarter of last year, higher than the flash estimate and forecast (both 2.5%) announced last month. With the U.S. economy maintaining solid growth and inflation revised upward, the Federal Reserve (Fed), which halted rate cuts last month, is expected to continue a cautious monetary easing stance for the time being.

Chris Larkin, Investment Managing Director at Morgan Stanley eTrade, analyzed, "Although there are recent concerns about the strength of U.S. consumers, most indicators continue to show that the U.S. economy, while possibly easing, remains on a solid foundation."

Investors' attention is focused on the January core PCE price index to be released on the 28th. According to Bloomberg News, the core PCE price index for last month is expected to have risen 2.6% year-on-year. This would be a decline from the previous month (2.8%) and the lowest level in seven months since June last year (2.6%). Amid growing expectations of a price rebound, attention is on whether the January core PCE price index can alleviate such concerns.

U.S. Treasury yields are mixed within a narrow range. The 10-year U.S. Treasury yield, a global bond yield benchmark, rose 2 basis points (1bp = 0.01 percentage points) from the previous trading day to 4.27%, while the 2-year U.S. Treasury yield, sensitive to monetary policy, moved down 1bp to 4.06%.