New York, NY - March 6, 2024 - Wall Street witnessed a reversal of fortune today, as major stock indexes retreated after four consecutive months of gains. The primary culprit? A collective stumble by the once-unstoppable "Magnificent Seven" tech giants.
The S&P 500 shed 0.1%, while the tech-heavy Nasdaq Composite saw a steeper decline of 0.4%. The Dow Jones Industrial Average fell roughly 98 points, or 0.2%, mirroring the broader market sentiment. This pullback comes despite record-breaking performances in the past four months, with the S&P 500 and Nasdaq closing at all-time highs last week.
However, investor enthusiasm for tech stocks appears to be waning. While chipmaker Nvidia defied the trend, surging 3.6% after reaching a $2 trillion market cap milestone, the rest of the "Magnificent Seven" faltered. Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Tesla all experienced losses, with Tesla experiencing the most significant drop at 7.2%.
These losses highlight investor concerns about the sustainability of the "Magnificent Seven's" lofty valuations and their ability to deliver future earnings that justify their current prices. This sentiment echoes the observations of Bob Doll, CEO at Crossmark Global Investments, who remarked, "The Magnificent Seven earned their name last year due to their outsized role in driving market gains. This year, the group is starting to 'fray a little bit.'"
While the tech sector experienced a rough day, the broader market presented a more nuanced picture. Six out of the eleven S&P 500 sectors managed to advance, with utilities leading the charge with a 1.6% rise. Smaller companies, represented by the Russell 2000 index, also performed better, posting a slight gain.
Meanwhile, the cryptocurrency market continued its ascent, with Bitcoin breaking past the $67,000 mark, inching closer to its all-time high of $69,000 set in November 2021. This surge positively impacted Coinbase Global, a leading crypto exchange, whose shares spiked by 11%.
On the bond market, the yield on the 10-year Treasury note rose to 4.218%, reflecting investor adjustments following weaker economic data released earlier. The coming days will be filled with key economic indicators, including the February jobs report and the consumer price index, both crucial in gauging the trajectory of inflation and impacting future Federal Reserve decisions.
While initial expectations of a rate cut by the Fed during their March meeting have been abandoned, market forecasts still anticipate a downward adjustment of at least 0.75 percentage points by year-end, according to data from CME Group. This disconnect between the market's rally and expectations of rate cuts raises concerns, as Liz Ann Sonders, Chief Investment Strategist at Charles Schwab, emphasizes, "Another round of hot economic data could pose a significant test for the market."
The global market picture remained subdued, with minor losses in the Stoxx Europe 600 and Japan's Nikkei 225. Hong Kong's Hang Seng Index experienced a steeper decline of 2.3%. As the market awaits the release of key economic data and navigates the complexities of potential rate cuts, one thing remains clear: investors are approaching the "Magnificent Seven" with a newfound caution, seeking diversification and preparing for potential market corrections.
