China’s Emergency Interest Rate Cut Causes Market Fizzle: Nvidia Remains Steady
Chinese officials have taken aggressive measures by cutting interest rates in an emergency move to stimulate growth that has remained stagnant since the Covid crisis. This decision has had a dampening effect on the market, reversing the brief bounce that occurred on Monday. The move comes as China also suspends issuing data about youth unemployment, which has been persistently high in recent months.
The economic problems in China have been simmering for a while, contributing to the market’s peak in July. However, these latest actions by the Chinese government serve as an admission that the issues run deeper than anticipated, raising concerns of panic setting in.
In the midst of this economic turbulence, one tech giant stands out – Nvidia. While other big-cap technology stocks, such as Apple and Microsoft, face pressure, Nvidia remains in positive territory on Tuesday morning. In fact, several price target increases have contributed to the stock’s steady performance. Nvidia’s dominance lies in its ability to sell an abundance of AI chips, making it the leading stock in the market.
The question now is how much further this corrective action will deepen before finding support. Charts are reflecting a deterioration in market conditions, negative news flow persists, and the outlook for the season is bleak. Buyers are faced with a lack of compelling reasons to enter the market at this point.
Failed bounces often characterize market downtrends. When dip buyers find themselves trapped and suffer quick losses, downward momentum gains traction. Nvidia alone cannot single-handedly support the market while Apple and Microsoft remain under pressure.
It’s not just the big-cap technology sector that is experiencing challenges. The financial sector, including banks, is also indicated to be lower due to concerns over potential downgrades by the Fitch rating agency. Additionally, worries about slowing Chinese demand have led to a decline in oil and commodities.
The bottom line is that the market is going through a period of correction. While there are eager bulls ready to invest in their favored stocks, there are no strong indications yet that the market is finding support. The lack of positive news flow coupled with an unfavorable calendar only exacerbates the situation.
In light of this, investors may want to observe their preferred stocks for pullbacks and identify support levels before making any financial commitments. The expectation is that the market will remain choppy and inconsistent for several weeks, warranting a cautious approach without any immediate sense of urgency.
(AAPL and MSFT are holdings in TheStreet’s Action Alerts PLUS portfolio. To receive alerts before the portfolio buys or sells these stocks, learn more now.)
