On Monday, US benchmark equity indexes experienced a downturn, primarily influenced by a significant sell-off in the technology sector. Investors were parsing through the latest data related to the manufacturing industry, which presented a mixed narrative that has implications for economic growth trends.
Notably, shares of Nvidia were down a staggering 8.8%, triggered by reports suggesting that certain servers linked to a fraud case in Singapore might involve Nvidia chips. These servers, supplied by Dell Technologies and Super Micro Computer, were reportedly provided to local companies before being shipped to Malaysia, raising concerns about the integrity of the supply chain in the tech space. In addition to Nvidia’s drop, Dell shares fell by 7%, while Super Micro suffered an even harsher decline of over 13%.
These events highlight the vulnerability of technology stocks to external risks, particularly in relation to regulatory and legal proceedings. Meanwhile, two separate surveys provided contrasting insights into the state of the US manufacturing sector for February. According to the Institute for Supply Management (ISM), the data indicated a deceleration in the expansion rate, while S&P Global reported the most robust growth rate since June 2022.
BMO Capital Markets highlighted in their analysis that ISM's findings signaled that price pressures may be resurfacing within the production pipeline. This raises alarms for the Federal Reserve, particularly during a period when businesses could soon face the repercussions of significant tariffs. In related trade news, the exact tariffs to be imposed on imports from Canada and Mexico will start on Tuesday and are described as "fluid" by Commerce Secretary Howard Lutnick.
This suggests that the final rates may be adjusted lower than the initially proposed 25%. Additionally, the incremental 10% tariff on Chinese imports is confirmed and will remain in place. Turning to the energy markets, April West Texas Intermediate crude oil concluded the day down $1.64, with the settling price at $68.12 per barrel.
Similarly, May Brent crude, the global baseline for oil pricing, was last recorded down $1.59, resting at $71.22. This decline comes in the wake of OPEC+'s announcement that it will proceed with a plan to reintroduce production cuts of 2.2 million barrels per day, which is set to commence next month in a phased approach over 18 months. In contrast to the tech sector's decline, Verizon saw a positive movement of 1.6%.
Lockheed Martin announced a strategic partnership with Nokia and Verizon, aiming to integrate Nokia's advanced 5G technology into its 5G.MIL Hybrid Base Station. This collaboration aims to bridge commercial and military communication systems with cutting-edge technology. The interplay between market dynamics, technology sector vulnerabilities, and evolving trade policies presents a complex landscape for investors as we move forward into the next quarter..