Triple Hit on Wall Street: Nvidia, Tariffs, and the Fed Accelerate the Selloff

The market has been struggling over the past five sessions, but the situation deteriorated significantly on Thursday. Risk sentiment plunged sharply as traders faced a triple blow—underwhelming Nvidia earnings, confirmation that tariffs on Mexico and Canada will take effect, and a hawkish tone from multiple Federal Reserve officials.

The S&P 500 erased its gains for the year, while the Nasdaq 100 fell to its lowest level since November as algorithmic trading intensified the sell-off towards the end of the session, breaking key support levels. Losses in stocks could deepen on Friday as the end of the month approaches.

Although it was difficult to pinpoint a single catalyst, negative sentiment is growing regarding the impact of the Trump administration’s policies on the U.S. economy, especially as inflation remains persistently high. Nvidia, despite delivering good—but not exceptional—earnings, started the day strong but collapsed by the end of the session, closing down over 8%.

Key Technical Levels for Friday

The final trading day of the month will be crucial for technical levels. The S&P 500 closed January at 6,040.53 points, while the Nasdaq 100 finished at 21,478.05 points.

Sustained trading below these levels on Friday could prompt portfolio managers to withdraw even more assets from equities. The sharp sell-off highlights how tense market sentiment has become amid high political uncertainty and signals even greater volatility ahead.

Concerns about tariffs continue to mount, and signs of rising unemployment, slowing growth, and stubborn inflation are emerging. However, the main issue on Thursday was the “sell the news” reaction to Nvidia’s (NVDA) strong earnings report.

Has the AI Boom Lost Its Spark?

Analysts welcomed Nvidia’s results, with some even raising price targets and making optimistic comments. The problem, however, is that the AI hype has lost its magic.

Although investments in AI infrastructure will remain massive, and profitable applications will continue to emerge, expectations became too high, and valuations overstretched—similar to the dot-com bubble in 2000.

The “Magnificent Seven” (MAGS) stocks have been struggling for some time. The group peaked on December 18, 2024, and has been under pressure for months. The sell-off accelerated on Thursday, with Nvidia leading the decline, falling about 8.3%.

Weak Market Breadth Raises Concerns

The problems in the AI sector dragged down the entire tech segment, with the Nasdaq 100 (QQQ) dropping around 2.6%. The Russell 2000 (IWM) lost 1.5%, hitting its lowest level since September 2024.

One of the most worrying aspects of Thursday’s trading was weak market breadth.

• Only 2,300 stocks gained, while 7,300 declined
• New 12-month lows surged to 440

This confirms we are in a correction, and a key issue is that AI and the “Magnificent Seven” are no longer leading the market.

Hopes for a rotation into new market leaders have not materialized, and no other sector has taken the lead. The market needs time to stabilize, so protecting capital and exercising patience is crucial until better technical conditions emerge.