Despite exceeding earnings expectations, Marvell Technology Inc.’s results sparked fresh concerns about the artificial intelligence trade, and investors’ fears of a global trade war caused a market correction Thursday, causing the tech-heavy Nasdaq to experience a selloff of the sum-of-all-fears kind.
The Nasdaq Composite COMP closed at 18,069.26, down 10.4% from its record close of 20,173.89 on December 16, down 483.48 points, or 2.6%. A 10% decline from a recent peak is referred to be a correction. After a 20% decline from a peak, a correction becomes a bear market.
As investors seemed dissatisfied with Marvell’s revenue forecast, the company’s stock (MRVL) fell by almost 20%, “curbing enthusiasm among investors banking on continued strength from the AI boom,” according to a note from Fawad Razaqzada, market analyst at City Index and Forex.com. This caused weakness in other chip stocks.
Ahead of its results announcement, shares of Broadcom Inc. (AVGO), another significant participant in the AI boom, fell more than 6%. Six months of gains were erased as shares of Nvidia Corp. (NVDA), the AI boom’s darling, fell 5.7% and have now lost over 10% this week.
Following a Wednesday recovery, markets began a steep and widespread selloff again due to concerns that escalating global trade tensions would cause a significant slowdown or even a recession. Following President Donald Trump’s announcement on social media that 25% tariffs on Mexican imports, which were imposed on Tuesday, would be suspended until April for “anything that falls under the USMCA,” or the U.S.-Mexico-Canada Agreement on trade, losses were reduced. Following Trump’s executive order in the afternoon that exempted all USMCA-compliant imports from Mexico and Canada from tariffs until next month, stocks made an effort to reduce losses, however
The S&P 500 SPX traded below significant chart support at its 200-day moving average near 5,731, and it completed the day down 104.11 points, or 1.8%, at 5,738.52. Analysts have cautioned that a closure below the average, which is regarded as a stand-in for the long-term trend, may lead to additional selling and further declines.
Chris Weston, head of research at Pepperstone, an Australian brokerage, stated, “It remains the line in the sand for risk, and…the market knows that nothing good happens below the 200-day MA.”
In a note published Thursday afternoon, Jonathan Krinsky, chief market technician at BTIG, stated that if the S&P 500 were to lose its hold on the 200-day moving average, the next possible support area would be around 5,650. This area had previously been resistance from the previous fall and has also demonstrated volume-based support for the S&P 500 e-mini futures contract (ES00).
Nov. 1, 2023, was the most recent close below the average. It may not be all bad, though. According to Tomi Kilgore of MarketWatch, the S&P 500 only stayed below the 200-DMA for eight sessions during a nine-session period before starting to rise again.
As you can see, Friday may be a crucial day for markets due to the Powell speech and the high-stakes jobs report.
The S&P 500 ended Thursday 6.6% below its record close of 6,144.15 set on February 19 and would be corrected if it closed below 5,529.74.
With a 1% decline, the Dow Jones Industrial Average DJIA ended the day at 42,579.08, 5.4% below its record close of 45,014.04 on December 4. A correction would be indicated by a close below 40,512.64.
