Tech Stocks May Lead Early Sell-Off On Wall Street

The major U.S. index futures are currently pointing to a sharply lower open on Monday, with stocks likely to extend the pullback seen during last Friday’s session.

A sell-off by technology stocks is likely to weigh on Wall Street, as AI darling and sector leader Nvidia (NVDA) is plummeting by 11.5 percent in pre-market trading.

The plunge by Nvidia comes after Chinese startup DeepSeek’s AI Assistant overtook rival ChatGPT to become the top-rated free application available on Apple’s App Store in the United States.

DeepSeek’s ascendance has doubt on Silicon Valley’s hefty AI capex spending and the sustainability of the U.S. technical edge in artificial intelligence.

After turning in a relatively lackluster performance early in the session, stocks moved mostly lower over the course of the trading day on Friday. The major averages all moved to the downside, with the S&P 500 giving back ground after reaching a new record intraday high.

The major averages climbed off their worst levels going into the close but remained in negative territory. The Dow fell 148.82 points or 0.3 percent to 44,424.25, the Nasdaq slid 99.38 points or 0.5 percent to 19,954.30 and the S&P 500 dipped 17.37 points or 0.3 percent to 6,101.24.

Despite the pullback on the day, the major averages still posted strong gains for the holiday-shortened week. While the Dow surged by 2.2 percent, the Nasdaq and the S&P 500 both jumped by 1.7 percent.

The weakness that emerged on Wall Street may have reflected concerns about the outlook for interest rates ahead of the Federal Reserve’s monetary policy meeting next week.

While the Fed is almost universally expected to leave interest rates unchanged, traders are likely to pay close attention to the accompanying statement for clues about the outlook for rates.

Recent economic data has led to concerns about the Fed leaving rates on hold for a prolonged period, but many economists still expect the central bank to resume cutting rates sometime in the first half of the year.

CME Group’s FedWatch Tool is currently indicating a 71.1 percent chance rates will be lower by at least a quarter point following the Fed’s June meeting.

On U.S. economic front, revised data released by the University of Michigan showed consumer sentiment unexpectedly deteriorated by more than previously estimated in the month of January.

The University of Michigan said its consumer sentiment index for January was downwardly revised to 71.1 from the preliminary reading of 73.2. Economists had expected the index to be unrevised.

The consumer sentiment index is down from the final December reading of 74.0, marking the first decrease in six months.

Meanwhile, a report released by the National Association of Realtors showed existing home sales jumped by much more than expected in the month of December, reaching their highest level since last February.

Semiconductor stocks showed a significant move to the downside on the day, dragging the Philadelphia Semiconductor Index down by 1.9 percent.

Texas Instruments (TXN) led the semiconductor sector lower, plunging by 7.5 percent after reporting better than expected fourth quarter results but providing disappointing earnings guidance for the current quarter.

Oil and networking stocks also saw notable weakness, while pharmaceutical stocks showed a strong move to the upside, driving the NYSE Arca Pharmaceutical Index up by 1.4 percent.

U.S.-listed shares of Danish drug maker Novo Nordisk (NVO) surged by 8.5 percent after the company announced positive trial results for its obesity drug.

Commodity, Currency Markets

Crude oil futures are falling $0.46 to $74.20 a barrel after inching up $0.04 to $74.66 a barrel last Friday. Meanwhile, after rising $13.90 to $2,778.90 an ounce in the previous session, gold futures are sliding $17 to $2,761.90 an ounce.

On the currency front, the U.S. dollar is trading at 154.25 yen versus the 155.98 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.0523 compared to last Friday’s $1.0497.

Asia

Asian stocks fell broadly on Monday as investors reacted to weak Chinese data and awaited interest rate decisions from the U.S. Federal Reserve and the European Central Banks this week for directional cues.

Gold retreated and the dollar gained following U.S. President Donald Trump’s brief imposition of tariffs on Colombia. Oil traded lower as Trump reiterated calls for OPEC to cut prices.

China’s Shanghai Composite finished marginally lower at 3,250.60 after new data showed Chinese manufacturing activity unexpectedly shrank in January and non-manufacturing activity growth slowed sharply – raising concerns about first quarter growth and the effectiveness of stimulus measures.

In addition, profits at China’s industrial firms fell for a third straight year in 2024, official data showed on Monday, highlighting the need for increased economic support.

Hong Kong’s Hang Seng Index rose by 0.7 percent to 20,107.77, with Chinese tech companies such as Tencent and Alibaba leading the way higher.

Japanese markets fell as a slump in tech stocks overshadowed gains in the financial sector. The Nikkei 225 Index slid 0.9 percent to 39,565.80, while the broader Topix Index settled 0.3 percent higher at 2,758.07.

Technology stocks such as Tokyo Electron, SoftBank Group, Advantest and Fujikura plunged 5-11 percent amid DeepSeek’s emergence as a disruptive force in the AI landscape.

Chinese firm DeepSeek’s artificial intelligence chatbot has soared to the top of the Apple Store’s download charts, casting doubt on Silicon Valley’s hefty AI capex spending and the sustainability of the U.S. technical edge in artificial intelligence.

Lender Mitsubishi UFJ Financial gained 0.7 percent, while Sumitomo Mitsui Financial and Mizuho Financial both added 1.6 percent on expectations that higher interest rates will produce stronger domestic profits.

Seoul markets were closed for the Lunar New Year holiday. The Australian market was closed for Australia Day. New Zealand’s benchmark S&P/NZX-50 Index slipped 0.2 percent to 12,999.72.

Europe

European stocks have moved lower on Monday as artificial intelligence-related stocks succumbed to selling pressure on doubts over America’s technological dominance.

Investors also digested weak economic data from China and looked ahead to the Fed and ECB interest rate decisions due this week.

While the German DAX Index is down by 0.8 percent, the French CAC 40 Index is down by 0.5 percent and the U.K.’s FTSE 100 Index is down by 0.2 percent.

Chip equipment maker ASML has moved sharply lower after Chinese startup DeepSeek’s AI Assistant overtook rival ChatGPT to become the top-rated free application available on Apple’s App Store in the United States.

Siemens Energy, which makes everything from gas and wind turbines to power network equipment and transmission technology, has also plunged.

On the other hand, low-cost airline Ryanair has rallied after reporting better-than-expected quarterly earnings.

British American Tobacco has also jumped after the Trump administration withdrew a plan to ban menthol cigarettes in the U.S.

U.S. Economic News

The Commerce Department is due to release its report on new home sales in the month of December at 10 am ET. Economists expect new home sales to climb 0.9 percent to an annual rate of 670,000 in December after spiking by 5.9 percent to a rate of 664,000 in November.

At 11:30, the Treasury Department is scheduled to announce the results of this month’s auction of $69 billion worth of two-year notes.

The Treasury Department is also slated to announce the results of this month’s auction of $70 billion worth of five-year notes at 1 pm ET.