U.S. Markets Decline Amid Tech Weakness
U.S. equity markets saw a sharp downturn on Thursday, with growth-oriented sectors leading the sell-off. The Nasdaq Composite fell over 2.5%, pressured by Marvell Technology’s weak forward guidance, which overshadowed its strong earnings report. The reaction highlights the high expectations placed on AI-related companies and the broader technology sector.
Investor sentiment was further dampened by concerns over stretched valuations in growth equities, especially amid uncertain earnings forecasts. Additionally, U.S. shares have now erased all gains since Donald Trump’s November 2024 election victory, driven largely by uncertainties stemming from his tariff policies.
Meanwhile, European markets traded slightly higher after the European Central Bank (ECB) decided to cut interest rates, providing relief to investors, while Asian markets saw support from optimism around Alibaba’s latest AI developments.
Market Trends and Sector Performance
Market leadership continues to broaden, reinforcing the case for diversification amid ongoing volatility. While U.S. equities have had a choppy start to 2024, international developed markets have outperformed significantly. Defensive sectors such as healthcare and consumer staples have remained resilient, while technology and consumer discretionary stocks have underperformed year-to-date.
Despite near-term headwinds, the broader bull market remains intact, though investors should prepare for persistent volatility and a slower pace of gains.
Latest Market and Economic Developments
Asian Markets Follow Wall Street Losses
Asian equities declined on Friday, mirroring Wall Street’s downturn, as investor uncertainty grew following President Trump’s decision to delay 25% tariffs on most Mexican and Canadian goods after initially imposing them.
- Japan’s Nikkei 225: ↓ 2.1%
- Australia’s ASX 200: ↓ 1.6%
- South Korea’s KOSPI: ↓ 0.4%
- Chinese and Hong Kong markets: Modest declines
U.S. Equity Futures Edge Higher Before Jobs Report
U.S. equity futures saw modest gains overnight as investors awaited the monthly jobs report for insights into economic strength. Tech stocks remained in focus following Marvell’s weak AI-driven forecast, though Broadcom shares surged over 12% in after-hours trading after reporting strong earnings and positive guidance.
European Markets Close Higher on ECB Rate Cut and Tariff Relief Hopes
European equities ended slightly higher on Thursday, with the STOXX 50 rising 0.5%, supported by the European Central Bank’s rate cut and expectations of tariff exemptions for agricultural goods.
Key gainers:
- Air France-KLM: +14% (strong earnings, cost-cutting plans)
- Lufthansa: +7% (stronger-than-expected earnings)
- Deutsche Post: +12% (profitability improvements)
Forex and Commodities Overview
- U.S. Dollar Index: Stabilized above 104, supported by Trump’s temporary exemptions on Canadian and Mexican goods, but remained on track to lose over 3% for the week due to trade tensions.
- EUR/USD: Rose to 1.0807, driven by expectations of higher public spending across Germany and other European nations to bolster defense investments.
- Bitcoin: Dropped nearly 4% following Trump’s executive order to create a strategic Bitcoin reserve, which will be funded by seized Bitcoin assets rather than new government purchases. The cryptocurrency is now valued at $86,721.
- Oil Prices: Steady but near their weakest levels of the year. Brent and WTI futures were set for their worst weekly loss since October, weighed down by tariff concerns, rising supply, and OPEC+ production hikes.
China’s Trade Data Misses Expectations
- Exports: Grew by just 2.3% year-on-year in January-February.
- Imports: Unexpectedly fell 8.4%, missing economists’ forecasts.
The weaker-than-expected trade data raises concerns about China’s economic recovery, just days after the government set a 5% GDP growth target for 2025.
ECB Cuts Eurozone Growth Forecast
The European Central Bank (ECB) revised its eurozone GDP growth forecast to 0.9% for 2024, down from 1.1%. Meanwhile, inflation is projected to rise to 2.3% in 2025, before easing to 1.9% by 2026, with the ECB continuing its rate-cut cycle.
Stocks in Focus: Earnings and Market Movers
Broadcom Delivers Strong AI-Driven Forecast
- Revenue Projection: $14.90 billion (exceeding market expectations of $14.76 billion)
- AI Revenue Growth: 77% YoY to $4.1 billion
- Stock Movement: +13% in after-hours trading
Costco Reports Strong Sales But Margin Pressures
- Revenue: $63.72 billion (vs. expected $63.13 billion)
- Earnings Per Share: $4.02 (missed expectations of $4.11)
- Challenges: Rising costs, particularly egg prices, impacting profit margins
SpaceX Starship Explosion Halts Mars Program
- Incident: Starship spacecraft exploded minutes after launch on Thursday, marking the second consecutive failure for the Mars program this year.
- FAA Response: The FAA halted air traffic in parts of Florida as it investigates the incident.
CMA CGM Plans $20 Billion U.S. Investment
- Investment Scope: Will create 10,000 jobs and expand shipping logistics and terminals.
- Fleet Expansion: Plans to increase U.S.-flagged vessels from 10 to 30.
- Additional Infrastructure: Developing a new air cargo hub in Chicago.
- Strategic Alignment: Aligns with the Trump administration’s push to boost domestic shipbuilding and reduce reliance on China.
DHL Announces 8,000 Job Cuts in Germany
- Reason: Largest job reduction in 20 years, due to declining letter volumes and regulatory changes.
- Cost Savings Target: €1 billion by 2027.
- Financial Performance: Despite a 7% earnings decline in 2024, DHL exceeded expectations and forecasts a 2025 operating profit of over €6 billion.
Air France-KLM and Lufthansa Report Strong Results
- Air France-KLM: Q4 operating profit nearly double analysts’ forecasts, though KLM unit faced rising costs.
- Lufthansa: Strong Q4 earnings, with cost-saving initiatives projected to yield €2.5 billion by 2028.
Tesla Upgraded by TD Cowen
- New Price Target: $388
- Positive Outlook: EV demand, autonomous driving, and robotics expansion.
Robinhood Receives Overweight Rating from Cantor
- Price Target: $69
- Growth Potential: Analysts bullish on Robinhood’s crypto expansion.
Morgan Stanley Downgrades Ryanair
- Reason: Lowered to Equal-Weight from Overweight, citing valuation concerns after a 50% share price rally.
Upcoming Economic Data and Events
- U.S. Jobs Report: Economists forecast 159k new jobs.
- Market Focus: Shifting from Q4 earnings to macroeconomic trends and trade policy updates.
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