Stock Market Update

[BRIEFING.COM] The stock market was mixed today. Big tech stocks, semiconductor-related names, and utility shares with AI exposure registered outsized declines while money rotated to other areas of the market.

NVIDIA (NVDA 118.42, -24.20, -17.0%) logged its largest single-day loss in market capitalization ever, driven by concerns over China’s DeepSeek AI model. This AI model attracted attention after it was perceived as much more cost-effective than U.S. alternatives, such as OpenAI’s ChatGPT.

The potential of DeepSeek to challenge the competitiveness of leading U.S. AI players raised questions about the future direction of the sector, particularly if DeepSeek can deliver on its promises. In response, the PHLX Semiconductor Index (SOX) has plummeted 9.2%, as investors reassess capital spending plans.

This weakness did not leak into the "rest" of the equity market as AI exuberance that led many names sharply higher was rung out of the market. More S&P 500 sectors closed higher (six) than lower (five). 

The Dow Jones Industrial Average rose 0.7%, with 20 of its 30 components in the green. Meanwhile, the equal-weighted S&P 500 eked out a 0.1% gain, in contrast to the 1.5% drop in the market-cap weighted index. Market breadth was also more positive at the NYSE, where advancing issues lead decliners by a 3-to-2 ratio, though decliners outpace advancers at the Nasdaq by a 3-to-2 margin.

Still, the flight to safety impacted in the fixed-income market. The 10-year yield dropped ten basis points to 4.53% and the 2-year yield fell eight basis points to 4.19%. Also, today's $69 billion 2-yr note sale met tepid demand and a $70 billion 5-yr note offering garnered stronger interest than the 2-yr sale.

Investor caution was also palpable ahead of a busy earnings week, with around 40% of the S&P 500 by market capitalization set to report. Among them are two of the three $3 trillion companies—Apple (AAPL 229.86, +7.08, +3.2%) and Microsoft (MSFT 434.56, -9.50, -2.1%).

• Dow Jones Industrial Average: +5.1% YTD
• S&P Midcap 400: +3.8% YTD
• S&P 500: +2.2% YTD
• Russell 2000: +2.4% YTD
• Nasdaq Composite: +0.2% YTD

Reviewing today's economic data:

• December New Home Sales 698K (Briefing.com consensus 680K); Prior was revised to 674K from 664K
  • The key takeaway from the report is that new home sales growth was ahead of expectations in December, but selling prices jumped from the bottom of the range that was seen in 2024 toward the top, which presents a headwind to selling activity going forward.

Looking ahead to Tuesday, market participants receive the following economic data:

• 8:30 ET: December Durable Orders (Briefing.com consensus 0.4%; prior -1.1%) and Durable Orders ex-transport (Briefing.com consensus 0.5%; prior -0.1%)
• 9:00 ET: November FHFA Housing Price Index (prior 0.4%) and November S&P Case-Shiller Home Price Index (Briefing.com consensus 4.2%; prior 4.2%)
• 10:00 ET: January Consumer Confidence (Briefing.com consensus 108.1; prior 104.7)