Nasdaq 100: Nvidia’s 2% Slide Adds Pressure Ahead of CPI and Fed Decision

What’s Driving the Market Today?

The Nasdaq Composite opened the week with a 0.2% drop, pressured by losses in Nvidia shares, while the S&P 500 slipped 0.1%. The Dow Jones Industrial Average outperformed, gaining 40 points, or 0.1%. Investors are now focusing on key inflation data due Wednesday, which could impact the Federal Reserve’s policy decision next week.

Why Nvidia Shares Are Falling

Nvidia shares dropped more than 2% after China’s State Administration for Market Regulation announced an antimonopoly investigation into the chipmaker. The probe, tied to Nvidia’s acquisition of Mellanox, raises regulatory concerns for a company that has been instrumental in this year’s AI-driven tech rally.

Despite the setback, Nvidia shares remain up nearly 180% year-to-date. Its role as a leader in AI chip innovation has been a critical driver of the Nasdaq’s strong performance and broader market gains in 2024.

Inflation Data Takes Center Stage

The November consumer price index (CPI), due Wednesday, is expected to show a slight rise in inflation, with forecasts pointing to a 0.3% monthly increase and a 2.7% annual uptick.

This data comes ahead of the Federal Reserve’s December 18 meeting, where markets are pricing in an 85% likelihood of a 0.25% rate cut. Recent strength in the labor market has supported hopes of monetary easing, as the November jobs report showed growth without stoking inflationary fears.

Mixed Technical Indicators Raise Questions

Market technicals are signaling caution. Canaccord Genuity analysts noted deteriorating breadth in the S&P 500, with fewer stocks participating in the rally. At the same time, intermediate-term indicators present conflicting trends, creating uncertainty about the sustainability of recent gains.

The S&P 500 is up over 27% year-to-date, buoyed by strong performances in technology and AI-driven stocks like Nvidia. However, concerns about overbought conditions and market complacency could weigh on investor sentiment.

Key Movers Beyond Nvidia

Advanced Micro Devices dropped more than 1% after a downgrade from Bank of America, which highlighted Nvidia’s dominance in AI chips as a challenge for AMD’s market share.

In contrast, Palantir Technologies jumped 6% following a $37 million contract expansion with the U.S. Special Operations Command. This reflects continued demand for AI-driven solutions despite regulatory hurdles for other tech companies.

Market Forecast: Where Could the Market Be Headed Next?

While Nvidia’s regulatory issues create uncertainty, broader market optimism remains tied to expectations of Federal Reserve rate cuts and easing inflation. If Wednesday’s CPI data confirms moderate price increases, it could reinforce bullish momentum in the market.

However, Nvidia’s role as a bellwether for AI and semiconductors means its struggles may weigh on the broader tech sector. Traders should remain watchful of developments in the U.S.-China chipmaking rivalry and regulatory risks. The near-term outlook leans bullish, with technology likely to lead gains into year-end.

More Information in our Economic Calendar.