The S&P 500 ETF (SPY) and the Nasdaq 100 ETF (QQQ) closed Thursday deep in negative territory as tech stocks extended their losses.
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Fears of AI disruption and overspending are in the spotlight again. Cisco (CSCO) closed with a 12% loss after its earnings report was overshadowed by a weaker-than-expected adjusted gross margin. In addition, Apple (AAPL), International Business Machines (IBM), Advanced Micro Devices (AMD), and Palantir (PLTR) all finished with drawdowns of at least 3%.
Concerning signals from the labor market have also unnerved investors. For the week ended February 7, initial jobless claims fell by 5,000 to 227,000, higher than the consensus estimate of 223,000. Continuing jobless claims increased by 21,000 to 1.862 million and were also above the expectation of 1.85 million. Initial jobless claims serve as a gauge of layoffs, while continuing jobless claims track the number of people receiving unemployment benefits and reflect ongoing unemployment.
On Wednesday, the Bureau of Labor Statistics (BLS) announced that nonfarm payrolls increased by 130,000 in January, double the estimate of 65,000. At the same time, the BLS also revised total nonfarm payroll additions in 2025 to 181,000 from 584,000, marking the worst year for hiring outside of a recession since 2003.
Elsewhere, the U.S. has suspended a number of proposed restrictive measures against Chinese tech companies, potentially as a move to ease trade tensions following the completion of a trade truce between the two sides last October. These include sales of TP-Link routers, Chinese electric trucks and buses, and the U.S. operations of China Unicom and China Mobile, according to Reuters.
On Friday morning, the BLS will release January’s Consumer Price Index (CPI), providing the market with a key inflation gauge. Economists expect prices to rise by 2.5% year-over-year, down from 2.7% in December. The data will likely affect the odds of a 25 bps rate cut at the March 18 Federal Open Market Committee (FOMC) meeting, which have fallen to 7.8% from 23.2% over the past week, according to the CME FedWatch tool. A higher-than-expected reading could send the odds even lower, as higher rates work against inflationary pressures by increasing borrowing costs.
The S&P 500 (SPX) closed with a 1.57% loss, while the Nasdaq 100 (NDX) fell by 2.04%.