"AI抢饭碗" impacts the US stock market, Nasdaq "continues to decline"

Southern Finance, 21st Century Business Herald Reporter Wu Bin Report

At a critical moment in the US stock earnings season, technology stocks are under particularly significant pressure.

As of the close on February 4th Eastern Time, the S&P 500 index fell 0.51%, closing at 6,882.72 points; the Nasdaq Composite declined 1.51%, closing at 22,904.58 points. After two consecutive days of decline, the Nasdaq broke below its 100-day moving average; the Dow Jones Industrial Average rose 0.53%, closing at 49,501.3 points.

Regarding this round of tech sell-off, the sharp decline in the software sector is especially noticeable. Nvidia CEO Jensen Huang rebutted, stating that software products are tools, and artificial intelligence will use these tools rather than reinvent them.

It can be confirmed that after the sustained surge in tech stocks, other sectors may perform better in the future. Wolf Research Chief Investment Strategist Chris Seneck warned that the market is experiencing intense volatility: on one hand, investors are worried about US companies’ capital expenditure on AI; on the other hand, they are engaging in a battle of “hope and expectation”—the resilience of the US economy could drive market trends from a few sectors to a broader range.

Mixed Feelings

Despite the US stock market experiencing three consecutive years of large gains and reaching historic highs, the market still tends to give good feedback to companies with strong performance.

Goldman Sachs strategist Ben Snider found that among the S&P 500 companies that have published 2026 earnings forecasts, more than half of the forecasts are above analyst expectations. This proportion also exceeds the historical average by 40%.

Looking ahead, Goldman Sachs strategists are optimistic about the US stock market: although this year may not see the super-large gains of 2025, driven by solid fundamentals and a continuously growing economy, there is still significant room for upward movement.

However, caution is needed as signs of economic slowdown have already appeared in the US. If subsequent data worsens unexpectedly, it could impact US stocks. On February 4th, ADP released data showing that in January, private sector employment increased by only 22,000 jobs, below the market expectation of 48,000, and compared to an increase of 37,000 in December last year.

The ADP report specifically mentioned that manufacturing has been losing jobs every month since March 2024. Nela Richardson, Chief Economist at ADP, said that the low employment growth over the past two years has kept him cautious, and the narrow hiring pathway is also concerning.

Beware of Market Shocks from the New Fed Chair’s Policies

From Greenspan, Bernanke, Yellen to Powell, Federal Reserve monetary policy has been largely consistent. Unlike previous transitions where new Fed chairs often followed the established path, this time, Waller, appointed by Trump, carries the label of a “big reform and overhaul” of the Fed.

Waller’s support for balance sheet reduction remains a major concern for market participants. Over the years, Waller has publicly criticized Fed officials for allowing the central bank’s assets to expand, and markets worry that if he takes office, he might quickly implement balance sheet reduction.

Christopher Harvey, Head of Capital Markets Equity and Portfolio Strategy at CIBC, pointed out that if the Fed begins to shrink its balance sheet, this move would withdraw liquidity from the financial system and could negatively impact risk assets.

Data compiled by Barclays Global Stocks Tactical Strategy Head Alexander Altmann shows that since 1930, within one, three, and six months after a new Fed chair takes office, the average maximum drawdowns of the S&P 500 are 5%, 12%, and 16%, respectively. These declines all exceed the typical peak-to-trough drops within any randomly selected year.

Altmann warned that while markets may be anxious about whether Waller is perceived as “hawkish,” the real test is more likely to come after May. New Fed chairs generally face some stock market testing within the first six months of taking office.

Looking at history, when Powell took office in February 2018, the US experienced a sharp decline. At that time, rising inflation expectations triggered a “volatility crash,” causing stock indices to plummet rapidly.