Summary

The S&P 500 and Nasdaq ended sharply lower on Thursday, weighed down by a slump in chipmaker Nvidia after its quarterly report failed to rekindle Wall Street's AI rally, while investors focused on data pointing to a cooling U.S. economy.

Nvidia tumbled 8.5%, evaporating $274 billion in stock market value, after the Silicon Valley company gave a weaker-than-expected quarterly forecast for gross margin that overshadowed an upbeat revenue outlook. Chipmakers Broadcom dropped more than 7% and Advanced Micro Devices lost 5%.

The launch of low-cost artificial intelligence models from China's DeepSeek in January has cooled Wall Street's AI rally, while an analyst report this week suggesting Microsoft was scrapping some data center leases also raised concerns of AI overcapacity. With Nvidia's results and outlook failing to impress investors with high expectations, its stock has now fallen almost 20% from its record-high close on January 6. "Nvidia's earnings were good, but not like the blockbuster earnings that they've been delivering for a while," said Scott Welch, chief investment officer at Certuity.

The S&P 500 dropped 1.59% to end the session at 5,861.57 points. The Nasdaq tumbled 2.78% to 18,544.42 points, while the Dow Jones Industrial Average declined 0.45% to 43,239.50 points. It was the Nasdaq's deepest one-day percentage drop in a month. Volume on U.S. exchanges was heavy, with 15.8 billion shares traded, compared to an average of 15.3 billion shares over the previous 20 sessions.

The Cboe Volatility Index VIX, Wall Street's "fear gauge" closed at its highest since December 19.

While tech stocks dipped, other parts of the market saw gains. The S&P energy index rose 0.5%, tracking a jump in crude prices after U.S. President Donald Trump canceled oil major Chevron's license to operate in Venezuela.

Also weighing on investor sentiment, data showed jobless claims jumped more than expected in the previous week, while another report reiterated that economic growth slowed in the fourth quarter. Data showed jobless claims stood at 242,000, higher than estimates of 221,000. Thursday's data follows reports over the past week that suggested the economy was stalling, fears of which have also put all three major U.S. indexes on track for monthly declines. "We're now seeing inflation fears give way to growth fears, and that, in turn, is causing stocks to go, at best, sideways, and potentially even down," said Michael Green, chief strategist at Simplify Asset Management in Philadelphia.

On the trade front, Trump floated a 25% reciprocal tariff on European cars and other goods. He also said tariffs on Mexico and Canada will go into effect on Tuesday.

Investors are focused on monthly Personal Consumption Expenditure data, which is the Federal Reserve's preferred inflation gauge, due on Friday.

Traders expect the Fed to lower borrowing costs by at least 50 basis points by December, according to data compiled by LSEG.

In other stock news:

Shares of Salesforce dropped 4% after the business software seller forecast fiscal 2026 revenue below expectations.
Snowflake surged 4.5% after the data analytics provider forecast fiscal 2026 product revenue above estimates.
Viatris plummeted 15% after the drugmaker forecast downbeat annual results.
Warner Bros Discovery jumped 4.8% after saying it expects streaming profits to double this year.

Portfolio News

Active Trading Portfolio: Over the past three days, our EUR/JPY trading strategy generated a profit of €1,172 across three trades. We also closed our underperforming legacy position in MORN. Moving forward, our short-term trading will concentrate on FX and commodities, where we have maintained a 100% success rate year-to-date. Check Out the Active Trading Portfolio.
Option Trading Portfolio: Our SPY financed bear put spread is showing promising movement, aligning with our expectation of declining stock prices. Yesterday's 1.6% drop in the S&P 500 is encouraging, though it's still early. This trade remains open for those interested. Check Out the Option Trading portfolio.
Buy and Hold Portfolio: Our long-term buy-and-hold portfolio has achieved a 7% year-to-date return, outperforming the broader market indexes. We are evaluating five additional stocks for potential inclusion in the portfolio. Please refer to our Buy and Hold Portfolio for details. We will provide an update upon the completion of our stock selection. Check out out the Buy and Hold Portfolio.