Major Stock Indices Experience Mixed Performance Amidst AI Concerns and Tariff Tensions
NASDAQ and S&P 500 Struggle to Rebound
On Tuesday, the Nasdaq Composite (^IXIC) and S&P 500 (^GSPC) faced challenges in recovering from a significant stock sell-off driven by concerns about excessive optimism regarding Big Tech's AI investment returns. Investors also remained cautious as President Donald Trump resumed his hardline stance on tariffs ahead of the Federal Reserve's policy meeting, where the potential impact of his policies will likely be discussed.
The tech-heavy Nasdaq Composite (^IXIC) gained 0.3% after experiencing an over 3% decline at closing. The S&P 500 (^GSPC) saw a slight decrease, while the Dow Jones Industrial Average (^DJI) hovered near flatline. Stocks gradually recovered from losses incurred during Monday's tech-led rout, triggered by speculation about DeepSeek, a Chinese startup, developing a potentially more cost-effective AI model.
Nvidia (NVDA), a prominent chip giant, briefly rallied after plunging 17% in the previous session, resulting in a record $589 billion loss in market valuation.
Dollar Strengthens Amid Tariff Threats
Meanwhile, the dollar (DX=F) gained strength following renewed tariff threats from Trump, rekindling concerns about a trade war, which had already come into focus after a brief standoff with Colombia. Trump expressed his intention to impose universal tariffs "much bigger" than the 2.5% proposed by his incoming Treasury Secretary, Scott Bessent.
Investors are closely monitoring the Fed's two-day policy meeting, which commenced on Tuesday, in light of the potential inflationary risks posed by these tariffs. The central bank is generally expected to maintain interest rates unchanged based on recent positive economic indicators.
Key Earnings Reports
General Motors (GM) released a strong quarterly report, surpassing expectations in terms of sales and profits as it achieved progress in its EV and China operations. Boeing (BA) reported an annual loss of nearly $12 billion due to a strike and ongoing challenges within key divisions.
Amidst DeepSeek concerns, the market is paying close attention to Big Tech earnings announcements scheduled for this week, including Apple (AAPL), Tesla (TSLA), Meta (META), and Microsoft (MSFT).
Other Market Developments
* US home prices reached a record high in November, with the S&P Case-Shiller National Home Price Index showing a 3.8% increase from a year earlier, driven by rising mortgage rates.
* Nasdaq and S&P 500 attempted to recover from AI tech-related losses, with Nvidia experiencing a 2% bounce.
* Nvidia's stock began to recover after DeepSeek AI concerns triggered a near $600 billion loss, raising questions about overvaluation and excessive spending in the US artificial intelligence sector.
* GM CEO Mary Barra engaged in discussions with President Trump regarding tariffs, emphasizing the importance of a strong manufacturing industry for economic growth.