The Nasdaq’s decline of over 2% on Thursday marked a significant downturn, bringing the index to its lowest level since before the election of Donald Trump. Since reaching its peak on December 16, this technology-dominated index has decreased by more than 10% and is on track for its worst weekly performance since September, raising alarm bells among investors.
Investor Concerns Mount
Fears surrounding increased tariffs, disappointing employment statistics, and a potential slowdown in the AI sector have led to this selloff. The latest downturn signifies a major turnaround for technology stocks, particularly as leading executives actively supported Trump’s campaign during his ascent, even visiting him at his Mar-a-Lago estate in Florida.
Sector Reactions
Top companies that rallied over the past two years—such as Nvidia, Meta, and Apple—contributed to a boost in the Nasdaq, which soared 43% in 2023 and 29% in the previous year. The market had appeared resilient due to anticipated benefits from AI advancements, but now faces a more uncertain landscape.
Tim Donovan, co-head of value equity at Morgan Stanley Investment Management, commented on the evolving market sentiment, noting a shift towards “all-weather” businesses amid the current turmoil. He added, “The market is witnessing an unwinding of high-risk trades, with investors gravitating towards companies that can manage daily volatility.”
Tariffs and Economic Effects
Investors worry about the repercussions of tariffs, which went into effect late Tuesday, including a 25% tariff on imports from Canada and Mexico, along with an added 10% tariff on Chinese goods. Though temporary exemptions were granted, the overall market reaction has been negative.
Market Performance Overview
Among big tech firms, Tesla emerges as the poorest performer of the year, showing a staggering 35% drop; just this Thursday, it fell nearly 6%. This downturn is particularly alarming given Elon Musk’s significant role as a major figure in the Trump administration.
Nvidia also faced challenges, with an 18% year-to-date decrease amid the chipmaker’s dependence on global trade relationships. With a production focus on Taiwan and other regions, tariffs add to the uncertainty. Nvidia’s finance chief, Colette Kress, highlighted the lack of clarity regarding government tariff policies during a recent earnings call.
Other tech players, like Broadcom, have also suffered, experiencing a 22% decline this year after enjoying substantial growth owing to AI demands.
Job Market Woes
In addition to tariff concerns, the job market poses its own challenges. According to ADP, private sector job growth was sluggish in February, adding only 77,000 jobs—a stark contrast to the Dow Jones forecast of 148,000. This slowdown intensifies fears of a broader economic deceleration.
Without a surge in performance by Friday, the Nasdaq will record its third consecutive week of losses, compounding worries among investors about the health of the tech sector amidst ongoing economic turbulence.
