Markets steady but dip post last week’s slide

U.S. stocks experienced a downward trend on Monday, adding to the considerable losses sustained last week. The S&P 500 index decreased by 0.5% after oscillating between small increments and downturns throughout the day. This comes in the wake of Friday’s substantial 1.7% fall following a series of unexpectedly poor reports on the U.S. economy.
The Dow Jones Industrial Average eked out a 33-point increase, or 0.1%, while the Nasdaq composite saw a decline of 1.2%. Among the day’s market highlights, Berkshire Hathaway rose by 4.1%, buoyed by the announcement of increased operating profits for the recent quarter. However, caution emerged when the company, famous for owning significant brands like Geico and BNSF Railroad, revealed it was holding an unused cash pile of $334.2 billion. This stock of cash might suggest that Warren Buffett, well-known for purchasing undervalued stocks, perceives limited buying opportunities in what some consider an overvalued market.
Starbucks’ shares climbed 1.3% following its announcement to cut 1,100 corporate roles and leave several hundred more jobs unfilled, as the new CEO, Brian Niccol, aims to streamline the business. In contrast, Domino’s Pizza saw a 1.5% decline after it slightly missed analysts’ expectations for the recent quarter. Though its international sector was a bright spot, there was a noticeable dip in sales trends for U.S.-based corporate stores.
Despite many major U.S. companies reporting better-than-expected profits for the final quarter of 2024, which helped the S&P 500 reach a record high before last week’s slump, the pace of earnings reports will decelerate this week. Yet, significant updates are anticipated, one of which is Nvidia’s results. Known for its pivotal role on Wall Street, Nvidia’s anticipated Wednesday report arrives amid new competition from China’s DeepSeek. The rivalry introduces skepticism over expected investments in Nvidia’s high-end chips and the broader AI-related infrastructure. On Monday, Nvidia’s volatile trading ended with a 3.1% drop, significantly affecting the S&P 500 due to its size and influence, second only to Apple.
Anthony Saglimbene, Ameriprise’s chief market strategist, expressed that Nvidia has limited leeway to fall short of anticipated profits this year, given its high valuation and growing competition. Other key earnings reports this week include those from Home Depot on Tuesday and Salesforce on Wednesday.
Ultimately, the S&P 500 dropped 29.88 points to close at 5,983.25, the Dow rose slightly by 33.19 to 43,461.21, and the Nasdaq fell by 237.08 to 19,286.92. The impending week will also provide insight on consumer confidence and inflation, significant issues for Wall Street, particularly after last week’s decline. Recent data shows a negative shift in consumer sentiment amid worsening inflation forecasts, influenced by tariffs and President Donald Trump’s policies. Persistent inflation could deter the Federal Reserve from offering further economic easing through interest rate cuts.
Although the Fed slashed its key rate late last year, it may maintain its current stance for now, as January’s policy meeting suggested, due to concerns about how policies such as tariffs and major deportations might drive up inflation.
In the bond market, Treasury yields fell in anticipation of upcoming reports, with the 10-year Treasury yield easing to 4.40% from 4.43% on Friday.
Internationally, German stocks advanced, with the DAX increasing by 0.6% thanks to a conservative political victory in elections focused on Europe’s largest economy’s challenges. However, shares fell across other parts of Europe and Asia. France’s CAC 40 dropped 0.8%, Hong Kong’s Hang Seng fell 0.6%, and Japan’s market remained closed due to a public holiday.