Stocks Plunge Amid Tech Weakness: S&P 500, Nasdaq Slide, Jobs Report Alters Rate Predictions

Investors deal with market volatility and economic uncertainty as the earnings season begins

• Volatile reigns as the S&P 500 and Nasdaq tumble and tech giants falter, raising concerns amid economic uncertainty.
• Earnings season and economic data fuel jitters, casting doubt on future trends and valuations.
• The jobs report has caused rate-cut expectations to shift as the market braces for economic indicators and corporate earnings.

The year began a rocky trajectory for stocks. In the initial week of trading, the S&P 500 stumbled by 1.5%, while the Nasdaq Composite nosedived by 3.2%. Concurrently, bond markets faced sell-offs, propelling the benchmark 10-year note yield back above 4%. With impending economic reports and the onset of earnings season, the market awaits further cues to help discern whether the preceding week's performance heralds forthcoming trends or simply signifies early-year profit-taking.

The market's recent turbulence wasn't an isolated event, but the tech sector bore the brunt. Tech giants like Apple (AAPL), Amazon (AMZN), Google (GOOGL) and Tesla (TSLA) suffered substantial declines. Apple encountered a nearly 6% plunge, hovering near long-term support at $179. Amazon and Google shares suffered drops of approximately 4.4% and just under 3%, respectively, while Tesla's shares depreciated by 4.4%. An article in The Wall Street Journal over the weekend highlighted board concerns regarding Elon Musk's alleged drug use and his management capability across multiple companies, potentially fueling investor apprehension.

Weakness in a seemingly strong jobs report

Initial impressions from Friday's employment report appeared robust, yet beneath the surface, signs of weaker job growth lurked. Downward revisions in job figures from the past two months, a recurring trend in 2023, tempered the report's optimism. A significant portion of the newly reported jobs originated in the government sector, predominantly comprising part-time roles. Despite the report's underlying frailty, expectations for a March rate cut dipped from 73% to 65%, according to the CME. The upcoming week promises an array of economic data, including the consumer price index (CPI) and producer price index (PPI), along with insight from various Federal Reserve members.

Simultaneously, the onset of earnings season this week featuring reports from Blackrock (BLK), Delta (DAL), JPMorgan Chase (JPM) and UnitedHealthcare (UNH), among others, could influence overall market valuations, potentially affecting recent market surges. FactSet's data indicates the S&P 500's 12-month forward-looking P/E (price-earnings) stands at 19.2, surpassing its average of 18.9. Expectations for fourth-quarter earnings growth have dwindled to 1.3% year-over-year, sharply down from the earlier forecast of 8% in late September, forecasting a mere 0.8% full-year 2023 earnings growth.

Boeing declines after in-flight problems

Today's market spotlight shines on Boeing (BA), with shares indicating an 8% premarket decline following an in-flight incident where a section of an aircraft's fuselage detached. Spirit Aerosystems (SPR), a principal Boeing supplier, is also signaling a 16% slump. The Dow Jones Industrial Average, leveraging a price-weighted formula compared to the S&P 500's market capitalization approach, bears the brunt of Boeing's decline, witnessing a 0.5% premarket drop, while the S&P 500 remains unchanged. Expectations point to heightened volume this week as investors return from vacations, absorbing the flurry of economic and earnings data. Amid this volatility, adhering to investment plans and long-term objectives remains prudent.

JJ Kinahan is CEO of IG North America—which includes tastylive, tastytrade and IG's FX Business. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee. @thejjkinahan 

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