Market Monitor February 24th

Tech Selloff Drags Markets Lower as Risk-Off Sentiment Intensifies

The Nasdaq dropped 1.2% due to concerns about overcapacity in AI data centers after reports surfaced that Microsoft had canceled data center lease contracts. This also negatively impacted other tech companies like Amazon (-1.8%), Nvidia (-3%), Super Micro Computer (-8%), and Micron Technology (-3.5%). Additionally, Business Insider reported that hedge funds have the lowest exposure to the Magnificent Seven (including Microsoft, Nvidia, and Tesla) since April 2023.

Meanwhile, the Dow Jones edged up slightly by 0.1%. Berkshire Hathaway (+4.1%) reached a record high following strong annual earnings and an increased cash position of $334 billion.

Nike (+5%) benefited from a buy rating by Jefferies analyst Randal Konik, who raised the price target from $75 to $115. He believes in CEO Elliott Hill’s strategy to restore partnerships with retailers and sees potential in the collaboration with Skims, Kim Kardashian’s fashion brand. According to Konik, Nike’s brand strength remains solid, and competitive risks are limited.

Daily Market Analysis – February 24, 2025 (After Market Close)

Major Index Performance

S&P 500 (SPY): Closed at 597.21 (-0.46%)

• Short-term trend: Down
• 1-week change: -2.05%
• 12-month change: +16.45%

The index is facing short-term weakness but remains strong in the long-term trend.

NASDAQ 100 (QQQ): Closed at 519.87 (-1.2%)

• Short-term trend: Down
• 1-week change: -3.4%
• 12-month change: +16.66%

Tech-heavy index underperformed the broader market, suggesting significant selling pressure.

Russell 2000 (IWM): Closed at 216.23 (-0.72%)

• Short-term trend: Down
• 1-week change: -4.31%
• 12-month change: +5.02%

Small caps continued to underperform, indicating a risk-off sentiment.

Sector Performance

Worst Performing Sectors (1 Week):

• Information Technology (-6%)
• Consumer Discretionary
• Communication Services

Tech sector experienced significant weakness, contributing to the NASDAQ decline.

Best Performing Sectors (1 Week):

• Consumer Staples (Slightly positive)
• Utilities (Flat)

Defensive sectors outperformed, signaling a cautious market.

Worst Performing Sectors (3 Months):

• Real Estate
• Materials
• Industrials

Rotation out of cyclical sectors is evident.

Best Performing Sectors (3 Months):

• Information Technology
• Communication Services

Market Breadth Indicators

Advance-Decline Ratio:

• Feb 24: 35.6% Advancers, 61.7% Decliners → Bearish breadth.

Previous days showed weak breadth, confirming market-wide selling pressure.

SMA Trends:

• SMA(20+): 36.5% (Weak short-term momentum)
• SMA(50+): 47.3% (Neutral)
• SMA(100+): 42.1% (Trending down)
• SMA(200+): 49.4% (Neutral)

Short-term moving averages indicate market is struggling to find support.

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Key Takeaways

• Bearish Sentiment: Broad-based decline across major indices and tech-heavy NASDAQ leading losses.
• Weak Market Breadth: Decliners outpaced advancers significantly.
• Sector Weakness: Tech and growth sectors hit hardest, while defensive stocks showed relative strength.
• Caution in Small Caps: Russell 2000’s underperformance suggests investors are avoiding high-risk assets.

Trading Strategy Consideration

• Short-term Traders: Market weakness suggests defensive positioning or short opportunities in tech.
• Long-term Investors: Pullbacks could provide entry points, but caution is warranted.