Nasdaq Slide Leads Stocks Lower; Earnings, Bessent Confirmation Hearing in Focus

The Nasdaq Composite Index ($IUXX) (QQQ) is down -0.75% today, extending last Friday’s sharp losses and sliding to a 1-1/2 month low. Several factors contribute to the Nasdaq's slide and may impact other indices as well:

1. Rising Bond Yields: The US 10-year T-note yield today climbed to a 14-month high, and the 10-year German bund yield rose to a 6-1/4 month high. This increase in yields makes bonds more attractive relative to stocks, leading to a sell-off in equities, particularly growth stocks that are more sensitive to interest rates.
2. Inflation Concerns: Rising crude oil prices are fueling inflation concerns and weighing on stocks and bonds. The price of WTI crude oil today is up more than +2% at a 5-month high after a wave of fresh US sanctions on Russian crude threatens to tighten global oil supplies further. Higher inflation erodes the purchasing power of consumers and can lead to lower corporate earnings, which in turn can negatively impact stock prices.
3. Megacap Technology Stocks: Losses in megacap technology stocks are weighing on the broader market. Nvidia (NVDA) is down more than -2% to lead losers in the Dow Jones Industrials. Meta Platforms (META) and Apple (AAPL) are down more than -2%. Tesla (TSLA) and Alphabet (GOOGL) are down more than -1%, and Amazon.com (AMZN) is down -0.15%. These large-cap technology stocks have a significant influence on the Nasdaq, and their declines can contribute to the index's overall slide.
4. Sector-specific Issues: Some sectors are experiencing specific challenges that may impact the broader market. For example, Californian utility stocks are adding to last week's sharp losses due to the risk of being blamed for the Southern California wildfires. Edison International (EIX) is down more than -10%, and PG&E Corp (PCG) is down more than -4%. Additionally, iRobot Corp (IRBT) is down more than -16% after reporting Q4 preliminary revenue that missed expectations.

These factors, particularly rising bond yields, inflation concerns, and the performance of megacap technology stocks, may impact other indices as well. The S&P 500 Index ($SPX) (SPY) is down -0.35% today, and the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.49%. However, the Dow's performance may be more resilient due to its composition, which includes more defensive sectors like consumer goods and healthcare. The S&P 500, being a broader index, may be more susceptible to the factors mentioned above, leading to a more significant decline.

The confirmation hearing for Scott Bessent as Treasury Secretary on January 16, 2025, had a significant impact on market sentiment, particularly in the financial sector. Here's how the hearing influenced market sentiment, based on the provided materials:

1. Market reaction to Bessent's nomination: When Bessent was nominated, the market reacted positively, with stocks like BlackRock (BLK), Bank of New York Mellon (BK), Wells Fargo (WFC), JPMorgan Chase (JPM), Goldman Sachs (GS), and Citigroup (C) all posting positive surprises in their EPS forecasts (Source: Earnings Calendar). This suggests that investors were optimistic about Bessent's nomination and its potential impact on the financial sector.
2. Bessent's economic views: During the hearing, Bessent painted the Trump administration as an opportunity for an "economic golden age." He emphasized the importance of tax cuts and proposed changes in the U.S. approach to global trade. These views aligned with the market's expectations for a pro-business administration, which could lead to increased economic activity and higher corporate profits (Source: Confirmation Hearing).
3. Market reaction to Trump's economic policies: Trump's proposed economic policies, such as major tariffs and changes in the U.S. approach to global trade, have been a contentious topic among investors. While some economists warn about the potential restart of inflation, Bessent downplayed these concerns during the hearing. This could have contributed to a more positive market sentiment, as investors may have perceived Bessent's nomination as a sign that the administration would prioritize economic growth over potential inflation risks.
4. Market reaction to the hearing: The market reacted positively to the confirmation hearing, with financial stocks posting strong gains. For example, BlackRock (BLK) had an EPS surprise of 5.84%, Bank of New York Mellon (BK) had a surprise of 5.73%, and JPMorgan Chase (JPM) had a surprise of 17.48% (Source: Earnings Calendar). These gains suggest that investors were optimistic about Bessent's nomination and the potential impact of his economic views on the financial sector.

In conclusion, the Nasdaq's slide is driven by a combination of rising bond yields, inflation concerns, and the performance of megacap technology stocks. The confirmation hearing for Scott Bessent as Treasury Secretary had a positive impact on market sentiment, particularly in the financial sector. Investors reacted favorably to Bessent's economic views and the potential impact of his nomination on the administration's economic policies.