Dow Jones futures climbed modestly on Sunday night, alongside gains in S&P 500 and Nasdaq futures, as investors turn their attention to Nvidia (NVDA) and upcoming earnings reports. The stock market experienced a sharp setback last week, with growth stocks, particularly in the tech sector, facing significant losses.
The S&P 500 had reached record highs on Wednesday, but by the end of the week, all major indices saw notable declines. The Dow, Nasdaq, and Russell 2000 all broke key support levels on Friday, with heavy losses concentrated in high-growth stocks such as Palantir Technologies (PLTR) and AppLovin (APP). Tesla (TSLA) shares also extended their weekly losses, sinking to near 2025 lows.
Futures Action and Market Outlook
As of Sunday evening, Dow Jones futures were up 0.35%, while S&P 500 and Nasdaq 100 futures rose 0.4%. However, it’s important to note that overnight futures movement does not always predict the direction of the broader market when trading resumes.
The earnings season continues with notable reports expected from Axon Enterprise (AXON) and Cava Group (CAVA) after their sharp losses last week. Software giants Salesforce (CRM) and Snowflake (SNOW) are also on deck, with Snowflake nearing a buy point. However, Nvidia’s earnings, set for Wednesday, will likely dominate the week, as the company’s performance is seen as pivotal to market sentiment, especially within the AI and semiconductor space.
Berkshire’s Earnings and Cash Reserves
Berkshire Hathaway reported a 71% surge in operating earnings to $14.53 billion for the fourth quarter. The conglomerate did not repurchase any stock in Q4, and its buybacks for the year totaled just $2.9 billion, the lowest since 2018. Cash holdings reached a record $334.2 billion, highlighting Warren Buffett’s cautious approach amid market volatility.
Market Summary: Growth Stocks Take a Hit
The broader market rally stumbled significantly on Friday, as new economic data pointed to slowing growth and rising inflationary pressures. Growth stocks, particularly those with high price-to-earnings ratios, were hit hardest. The Dow Jones Industrial Average fell 2.5% for the week, breaking below its 50-day moving average. The S&P 500 dropped 1.7%, testing its 50-day line after hitting a record high mid-week. The Nasdaq Composite slid 2.5%, falling below its 21-day and 50-day lines, while the small-cap Russell 2000 plunged 3.7%, closing below its 200-day moving average for the first time since late 2023.
The Invesco S&P 500 Equal Weight ETF (RSP) and the First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) also posted losses, with the latter retreating from its record highs. On the other hand, sector-focused ETFs such as the Energy Select SPDR ETF (XLE) and the Health Care Select Sector SPDR Fund (XLV) showed positive returns.
Growth ETFs Struggle, Speculative Stocks Crater
Highly speculative growth stocks endured heavy losses, particularly those in the ARK and FFTY ETFs. Palantir lost 14.9% for the week, while Axon saw a 24.9% crash. AppLovin dropped nearly 19%, and Reddit lost 15.3%. These stocks, which had experienced significant rallies over the past year, now appear to be consolidating after their meteoric runs.
Treasury Yields and Oil Prices
U.S. Treasury yields fell slightly, with the 10-year yield down six basis points to 4.42%, hovering near 2025 lows. Crude oil futures also saw a small decline, falling 0.4% to $70.40 a barrel.
Nvidia Earnings and AI Market Sentiment
All eyes are on Nvidia, with its earnings report expected on Wednesday. Investors will focus on demand for its AI chips, especially in light of competition from Broadcom (AVGO) and concerns about China’s DeepSeek AI platform, which could reduce the need for high-powered processors. Nvidia stock slid 3.2% last week, dropping just below its 50-day moving average. Its chart forms an ugly double-bottom base, with a potential buy point of 148.97.
Given Nvidia’s central role in the semiconductor and AI hardware sectors, its earnings will be crucial for the broader tech landscape, impacting stocks like Broadcom, Taiwan Semiconductor (TSM), and other AI chip manufacturers.
Tesla’s Struggles Amid Political Headwinds
Tesla stock saw a 5.1% decline last week, extending its losing streak to five weeks. Shares are now down 31% from their December peak. Investors have been concerned about the company’s progress on self-driving technology and CEO Elon Musk’s increasingly political statements, which could harm the brand. Meanwhile, Chinese EV competitors like BYD, XPeng, and Li Auto are performing well, though BYD and XPeng have become extended, while Li Auto cleared an early entry point on Friday.
Conclusion
The stock market faces a challenging environment, with growth stocks bearing the brunt of the recent sell-off. Nvidia’s earnings this week could offer some clarity on the AI and semiconductor sectors, while Tesla’s ongoing struggles reflect broader concerns about high-valuation growth stocks. Investors will need to exercise caution, especially given the uncertain macroeconomic landscape and the potential for further volatility in the coming weeks.
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