Tech Stocks Drag Major Indexes Lower Amid Market Uncertainty

NEW YORK — Major U.S. stock indexes experienced a downturn on Monday, with technology stocks at the forefront of the decline, as the market faced challenges following last week’s significant sell-off. The Dow Jones Industrial Average managed a minor gain, while the Nasdaq Composite and S&P 500 fell by 1.2% and 0.5%, respectively, marking the third straight day of declines for those indexes.

The drop in tech stocks came amid fears regarding demand for artificial intelligence (AI) technology, particularly in anticipation of earnings from market leader Nvidia. The trading day saw Nvidia shares close 3.1% lower, adding to a prior 4% loss. Other notable declines included Broadcom, down nearly 5%, and significant technology firms such as Microsoft, Amazon, Alphabet, Meta Platforms, and Tesla, which all lost ground.

“Markets are jittery and looking for reasons to take profits,” said Gene Goldman, chief investment officer at Cetera Investment Management. “Questions about the viability of AI technology are leading to fears of a sector correction.”

Adding to the stress, Nvidia’s upcoming quarterly report is projected to indicate a 73% increase compared to the previous year, but analysts suggest that the company may be poised for a brutal market correction. The uncertainty surrounding Microsoft’s strategic adjustments to its cloud infrastructure further exacerbated concerns about potential oversupply in the AI sector.

Amidst the tech turmoil, some stocks performed well. Nike shares surged nearly 5% after analysts from Jefferies recommended buying, projecting a possible 40% gain for the company over the next two years. Berkshire Hathaway stocks also rose over 4% after reporting a 70% increase in operating profit.

The broader market reacted to economic news, with the 10-year Treasury yield falling to 4.40%, indicating investor caution over potential interest rate adjustments by the Federal Reserve. This decline followed week-ending data revealing weaker-than-expected home sales and consumer confidence.

Investors are closely monitoring upcoming earnings reports from key retailers such as Home Depot and Lowe's, as well as the anticipated release from Nvidia on Wednesday. Additionally, this week’s release of the Personal Consumption Expenditure (PCE) index, the Fed’s preferred inflation gauge, will be pivotal in guiding market sentiment.

Gold futures increased 0.5% to around $2,970 per ounce, while Bitcoin, fluctuating recently, traded down nearly 4% to around $92,400.

Amid the fluctuations in the tech sector, other companies are making headlines for different reasons. Walgreens Boots Alliance shares rose 6.5% due to rumors of a significant buyout deal, while Palantir Technologies’ stock dropped 10.5%, following concerns related to defense budget cuts as directed by the Pentagon.

In the wake of this market turmoil, concerns seem to linger regarding the long-term outlook for tech stocks and the broader economic environment as investors grapple with rising inflation concerns and the implications of fiscal policies under the current administration.