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U.S. technology stocks fell on Friday as investors turned away from companies that had driven markets higher for much of this year.
The S&P 500, Wall Street’s main stock benchmark, fell 1.1 percent on Friday, while the tech-heavy Nasdaq Composite fell 1.5 percent. Elon Musk’s electric car manufacturer Tesla was among the biggest laggards, down 5 percent, while chipmaker Nvidia fell by 2.1 percent.
“I probably watch 30 different (market indicators) and they’re all down today,” said Jack Ablin, chief investment officer at Cresset Capital. “It was just a mass sale without much enthusiasm.”
As investors bet, tech stocks have risen sharply this year artificial intelligence would increase demand for everything from servers to microchips. The gains accelerated after Donald Trump’s election victory in November on bets that the president-elect would usher in more business-friendly policies when his term begins next month.
However, the sector has been more choppy in recent weeks as investors reassess their best-performing stocks heading into the year. The Federal Reserve also caused uproar last week when it forecast just two quarter-point interest rate cuts next year, compared to four cuts in September, as officials worried about the growing risk that inflation would rise significantly above the average The central bank’s 2 percent target could be.
The hawkish forecasts have pushed up the cost of long-term U.S. borrowing, with the 10-year Treasury yield rising to 4.63 percent on Friday, compared with September lows of about 3.6 percent. Higher yields typically reduce the attractiveness of holding stocks in fast-growing companies.
Citigroup analysts said Friday that while they still forecast the S&P 500 will rise about 10 percent from current levels by the end of next year, they expect a “more volatile phase of the bull market.”
The U.S. bank noted that this year’s rises in stock prices relative to corporate earnings “set a high bar for fundamentals in the coming year and even the year after that.” The S&P 500 trades at about 22.2 times next year’s expected earnings, compared with the last decade’s average of 18.1, according to FactSet data.
Greg McBride, chief financial analyst at Bankrate.com, said that “despite this volatile Friday, the market is still higher than Monday.”
He said: “Markets do not rise directly, and a decline often serves as a basis for the next market rise.”
The S&P 500 is still up 25 percent year-to-date even after Friday’s decline, roughly in line with last year’s gains.
The so-called Magnificent 7 Big Tech stocks – Apple, Microsoft, Meta, Amazon, Alphabet, Nvidia and Tesla – accounted for about half of the S&P 500’s total returns this year, including dividends, said Howard Silverblatt of S&P Dow Jones Indices .
However, all shares in the Magnificent 7 fell slightly on Friday.
During the holidays, trading activity is typically lower than usual, which can increase volatility.
