Nasdaq Index, Dow Jones, S&P 500 News: Inflation Fears Weigh on Tech Sector

Key Points

• Higher inflation reports spur bearish market sentiment.
• Diverse sector reactions amid inflation and rate cut concerns.
• Prolonged high inflation may delay Federal Reserve rate cuts.

Bearish Reaction to Producer Price Index

Currently, major U.S. stock indexes are trading lower following the release of another high inflation report, stirring concerns about the Federal Reserve’s rate cut timeline.

At 15:13 GMT, the blue chip Dow Jones is trading 38693.51, down 79.61 or -0.21%. The benchmark S&P 500 Index is at 5012.81, down 16.92 or -0.34% and the tech-heavy Nasdaq-100 Index is trading 15795.02, down 111.15 or -0.70%.

Ongoing Inflation Impact

Stocks are experiencing a tumultuous week, initially roiled by January’s consumer price index, which showed a 3.1% increase, surpassing the expected 2.9%. Despite a temporary rebound, with the S&P 500 achieving a new record high, the latest wholesale inflation report is again unsettling the market, suggesting potential delays in Federal Reserve rate cuts.

Sector Performances

Consumer Discretionary: Trading down by 0.96% at 1,431.2.

Technology: Currently lower by 0.63%, trading at 3,656.3.

Financials: Showing a decrease of 0.06%, trading at 660.07, influenced by declines in Bank of America and Capital One Financial.

Materials: Advancing by 0.88%, now at 538.46.

Health: Gaining 0.19%, currently trading at 1,693.46.

Stock Movements

Nvidia is maintaining strength, despite broader market declines. Contrarily, DoorDash is trading down by 11% after reporting a larger-than-expected loss. Conversely, Trade Desk is trading up by about 23% following a favorable fourth-quarter revenue report and positive forecast for the next quarter.

Economic Indicators

The producer price index for January is showing a 0.3% increase, higher than the 0.1% anticipated. The core PPI, excluding food and energy, is also rising by 0.5%, exceeding expectations. These data have pushed the 10-year Treasury yield above 4.3%, and the 2-year yield to its highest since December at 4.7%.

Current Market Outlook

The market is exhibiting a bearish sentiment in the short term, influenced by ongoing inflation concerns. The persistent high figures in both PPI and CPI suggest the Federal Reserve may postpone rate cuts, possibly until 2025. The increased Treasury yields are also reflecting the market’s apprehension about continued inflationary trends. While sectors like Health and Materials are showing positive movements, the general market mood remains wary, closely watching inflation developments and Federal Reserve policy actions.

Technical Analysis

The E-mini S&P 500 Index is currently trading lower this Friday. An early session surge failed to surpass the record high of 5066.50, resulting in a sell-off during the day.

The index has previously experienced a daily closing price reversal top, which led to a significant sell-off on Tuesday. Currently, bearish traders are anticipating a potential weekly closing price reversal top.

Should the index close below 5044.00, it would confirm a weekly closing price reversal top. A confirmation in the upcoming week could initiate a correction period lasting 2 to 3 weeks. In this scenario, the 50-day moving average, positioned at 4180.25, becomes the initial major target price.