DeepSeek Deep Sixes the Stock Market. How Far the S&P 500 Could Fall
3 min
DeepSeek just might derail the stock market’s rally.
The S&P 500 hasn’t had a correction , a 10% pullback from a high, since October 2023. Investors kept buying throughout 2024 despite angst surrounding the Federal Reserve and interest rates, not to mention numerous international concerns.
But now, worries about cheaper artificial intelligence models from the Chinese-developed app named DeepSeek may be the excuse that investors were waiting for to finally sell shares in earnest. Stocks plunged Monday .
The declines were biggest in ing tech companies, such as Nvidia , Broadcom and Microsoft . But other sectors, namely manufacturing and the utility or energy stocks that have big ties to the AI theme, were hit hard as well
The S&P 500 and Nasdaq Composite tumbled 1.5% and more than 3% respectively. The Dow Jones Industrial Average , which is less exposed to tech, gained nearly 300 points, or 0.7% .
The market is now closer to correction territory than it has been since August , when worries about a surge in the value of the Japanese yen versus the dollar spooked investors and led to a spike in volatility. But the major stock indexes still have a way to go before the declines from their peaks reach 10%.
The S&P 500 ended Monday at around 6012 , putting it just 2% below its record high. The blue-chip index would need to fall another 8% to just above 5500 to reach correction status. The Nasdaq is closer: It has fallen more than 4% from its peak and is 6% above the correction- territory level of 18,156.50.
But even before Monday’s DeepSeek bombshell, there were growing concerns that stocks may head into a correction. Barry Bannister, chief equity strategist at Stifel, recently reiterated a July call for the S&P 500 to fall 10% from its peak. He thinks it will drop to about 5500 later this year.
Bannister has been fairly bearish for the better part of a year. He said in a report Sunday that there is too much optimism about fiscal stimulus from President Donald Trump; the notion of American exceptionalism, or that stocks here have better prospects because the U.S. economy is more innovative and entrepreneurial; and hype about the Magnificent Seven of tech.
Bannister worries that core inflation and longer-term bond yields will remain higher for longer, creating a “a mild case of stagflation”—the dreaded combination of stagnant growth and persistent inflation. That may mean fewer Fed rate interest-rate cuts until the economy actually weakens, “which itself is not bullish,” Bannister wrote.
Trump’s threat of tariffs and stricter immigration policies, which would boost the cost of imported goods and potentially drive wages higher by curtailing the supply of labor, may also stoke fear of more persistent inflation.
So what should investors do now?
Bannister argues that “defensive value” stocks, such as healthcare and consumer staples companies, should outperform. Investors seem to agree: Both the Health Care Select Sector SPDR and the Consumer Staples Select Sector SPDR exchange-traded funds were up more than 2% as the broader market fell on Monday.
Bannister likes utilities too, but that sector is trickier. The group as a whole sank Monday, led lower by significant drops in Vistra and Constellation Energy , the two utilities that have gotten the biggest boost from AI’s demand for energy. But shares of classic, less exciting, regulated utilities, such as Duke Energy, Dominion Energy, and Xcel Energy , rallied. All three stocks have big dividend yields.
Dividend payers across all sectors could hold up better in a suddenly more volatile market. Simeon Hyman, global investment strategist with ProShares , told Barron’s that companies that pay dividends tend to be more stable. Companies may pull back on plans to buy back more stock or invest in their future if conditions change, but with rare exceptions “once you commit to dividend growth, you stick with it,” he said.
The SPDR S&P Dividend ETF and ProShares S&P 500 Dividend Aristocrats ETF , which recently added FactSet Research System , Erie Indemnity , and Eversource Energy to the fund, were both up nearly 2% Monday.
Still, even investors in dividend stocks need to be wary. There could be more downside ahead for the broader market. Simply put, stocks are arguably long overdue for a correction.
“The last time the market entered an official correction was 309 trading days ago, spanning well beyond the average number of 173 trading days without a correction since 1928,” Adam Turnquist, chief technical strategist for LPL Financial , said in a report last week.
There is a case to be made that there was too much optimism on the part of investors. Katie Stockton, founder and managing partner of Fairlead Strategies, noted that the Cboe Volatility Index, known as Wall Street’s fear gauge, recently fell to levels in the midteens from a three-month high of nearly 28 in mid-December. She thinks a VIX reading that low was reflecting complacency. The VIX surged to just under 20 Monday.
Stockton now thinks that Monday’s market pullback could lead to more downside for the next few weeks. She said investors should keep an eye on two key technical support levels for the S&P 500: the closing level of about 5783 that it traded at on Election Day, and if stocks dip below that, the 200-day moving average of 5608.
Remember, the level that would bring the market into correction territory is just above 5500, in flirting distance from the 200-day average.
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The lunar flyby would be the deepest humans have traveled in space in decades.
4 min
It’s go time for the highest-stakes mission at NASA in more than 50 years.
On April 1, the agency is set to launch four astronauts around the moon, the deepest human spaceflight since the final Apollo lunar landing in 1972.
The launch window for Artemis II , as the mission is called, opens at 6:24 p.m. ET.
National Aeronautics and Space Administration teams have been preparing the vehicles to depart from Florida’s Kennedy Space Center on the planned roughly 10-day trip. Crew members have trained for years for this moment.
Reid Wiseman, the NASA astronaut serving as mission commander, said he doesn’t fear taking the voyage. A widower, he does worry at times about what he is putting his daughters through.
“I could have a very comfortable life for them,” Wiseman said in an interview last September.
“But I’m also a human, and I see the spirit in their eyes that is burning in my soul too. And so we’ve just got to never stop going.”
Wiseman’s crewmates on Artemis II are NASA’s Victor Glover and Christina Koch, as well as Canadian Space Agency astronaut Jeremy Hansen.
What are the goals for Artemis II?
The biggest one: Safely fly the crew on vehicles that have never carried astronauts before.
The towering Space Launch System rocket has the job of lofting a vehicle called Orion into space and on its way to the moon.
Orion is designed to carry the crew around the moon and back. Myriad systems on the ship—life support, communications, navigation—will be tested with the astronauts on board.
SLS and Orion don’t have much flight experience. The vehicles last flew in 2022, when the agency completed its uncrewed Artemis I mission .
How is the mission expected to unfold?
Artemis II will begin when SLS takes off from a launchpad in Florida with Orion stacked on top of it.
The so-called upper stage of SLS will later separate from the main part of the rocket with Orion attached, and use its engine to set up the latter vehicle for a push to the moon.
After Orion separates from the upper stage, it will conduct what is called a translunar injection—the engine firing that commits Orion to soaring out to the moon. It will fly to the moon over the course of a few days and travel around its far side.
Orion will face a tough return home after speeding through space. As it hits Earth’s atmosphere, Orion will be flying at 25,000 miles an hour and face temperatures of 5,000 degrees as it slows down. The capsule is designed to land under parachutes in the Pacific Ocean, not far from San Diego.
Is it possible Artemis II will be delayed?
Yes.
For safety reasons, the agency won’t launch if certain tough weather conditions roll through the Cape Canaveral, Fla., area. Delays caused by technical problems are possible, too. NASA has other dates identified for the mission if it doesn’t begin April 1.
Who are the astronauts flying on Artemis II?
The crew will be led by Wiseman, a retired Navy pilot who completed military deployments before joining NASA’s astronaut corps. He traveled to the International Space Station in 2014.
Two other astronauts will represent NASA during the mission: Glover, an experienced Navy pilot, and Koch, who began her career as an electrical engineer for the agency and once spent a year at a research station in the South Pole. Both have traveled to the space station before.
Hansen is a military pilot who joined Canada’s astronaut corps in 2009. He will be making his first trip to space.
Koch’s participation in Artemis II will mark the first time a woman has flown beyond orbits near Earth. Glover and Hansen will be the first African-American and non-American astronauts, respectively, to do the same.
What will the astronauts do during the flight?
The astronauts will evaluate how Orion flies, practice emergency procedures and capture images of the far side of the moon for scientific and exploration purposes (they may become the first humans to see parts of the far side of the lunar surface). Health-tracking projects of the astronauts are designed to inform future missions.
Those efforts will play out in Orion’s crew module, which has about two minivans worth of living area.
On board, the astronauts will spend about 30 minutes a day exercising, using a device that allows them to do dead lifts, rowing and more. Sleep will come in eight-hour stretches in hammocks.
There is a custom-made warmer for meals, with beef brisket and veggie quiche on the menu.
Each astronaut is permitted two flavored beverages a day, including coffee. The crew will hold one hourlong shared meal each day.
The Universal Waste Management System—that’s the toilet—uses air flow to pull fluid and solid waste away into containers.
What happens after Artemis II?
Assuming it goes well, NASA will march on to Artemis III, scheduled for next year. During that operation, NASA plans to launch Orion with crew members on board and have the ship practice docking with lunar-lander vehicles that Elon Musk’s SpaceX and Jeff Bezos’ Blue Origin have been developing. The rendezvous operations will occur relatively close to Earth.
NASA hopes that its contractors and the agency itself are ready to attempt one or more lunar landing missions in 2028. Many current and former spaceflight officials are skeptical that timeline is feasible.
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