NEW YORK (AP) — Wall Street faced bring down losses on Friday as technology stocks, particularly the influential group known as the 'Magnificent 7', dragged the market down at the close of what began as another promising week.
The S&P 500 tumbled by 1.6%, with more than 80% of its member stocks losing ground amid rising concerns about profitability and the economic climate. This benchmark index, having briefly managed to hold onto modest gains earlier this week, concluded Friday’s trading session significantly down. The Dow Jones Industrial Average fell 475 points, or 1.1%, settling at 42,850, with the Nasdaq composite recording even steeper losses at 2%.
A key factor contributing to this downturn was the decline of major technology stocks, including semiconductor giant Nvidia, which dropped 2.4%. Other significant players such as Microsoft saw their shares decrease by 1.9%. These stocks, with their massive valuations, hold substantial power over the indexes, thereby exacerbated Friday’s bear market sentiment.
The retail sector also faced challenges, with both Amazon and Best Buy slipping 2% and 1%, respectively. Investors are watching this sector closely for insights on how companies performed during the recent holiday shopping season.
Despite the overall market decline, energy stocks presented some resilience, with crude oil prices rising 1.2% and the sector gaining 0.4%. This was one of the few bright spots amid the broader market struggles, as investors eyed potential changes in energy dynamics alongside the tumultuous economic backdrop.
Looking at the week as a whole, Friday’s market retrenchments came after the S&P 500 had sustained gains earlier on, marking it as close to a 25% rise for the year. This anticipated return to significant annual growth would mark the second consecutive year of over 20% gains, the first such occurrence since 1997-1998.
Nevertheless, uncertainty looms, as evidenced by Adam Turnquist, chief technical strategist for LPL Financial, who remarked, "There’s just some uncertainty over this relief rally we’ve witnessed since last week." This statement underlines the hesitancy investors feel amid fluctuated investor sentiment.
Adding to market complexity is the economic environment shaped by continual assessments of consumer spending and inflation trends. Recent reports indicate inflation, though still elevated, is easing, helping to buoy consumer confidence. A more shadowy picture is painted by reports showing wholesale trade sales fell by 0.2% in November, following slight gains previously.
The market is closely monitoring the Federal Reserve’s approach as well. After cutting interest rates three times throughout 2024, expectations remain tempered due to inflation being stubbornly above the Federal Reserve's 2% target. Consequently, economic foresight heading toward 2025 becomes tangled with concerns over labor market trends and fresh economic policies which incoming President Donald Trump may implement.
Part of the worry surrounds Trump’s inclination toward tariff policies which could push inflation higher and exacerbate already looming doubts about U.S. government debt and global trade dynamics.
While tumult was felt predominantly across U.S. markets this Friday, global sentiment showed mixed reactions. For example, Japan's benchmark index surged due to yen weakness against the dollar, whereas South Korean stocks fell amid political turmoil. Conversely, European markets managed slight gains, adding another layer to the international economic picture.
Bond yields held relatively steady with the 10-year Treasury yield rising to 4.62% from 4.59% late Thursday. The two-year Treasury yield remained unchanged at 4.33%.
For the upcoming week, Wall Street anticipates several economic updates, including reports on pending home sales, construction spending, and manufacturing metrics. These figures will help investors gauge the economic outlook as the year draws to its conclusion.