Stocks fell on Friday, closing out a holiday-shortened week on a down note. The losses were exacerbated by sharp declines in the Big Tech stocks known as the “Magnificent 7”, which hold significant influence over the market due to their large size. The S&P 500 fell by 1.1%, while the Dow Jones Industrial Average and the Nasdaq composite also experienced declines. Semiconductor giant Nvidia and tech titan Microsoft both saw drops in their stock prices. The market is closely watching the retail sector for clues on holiday shopping season performance, with companies like Amazon and Best Buy also experiencing losses.
On the flip side, energy stocks held up better than the rest of the market, with a marginal loss as crude oil prices rose. The recent relief rally observed since last week has introduced uncertainty, according to Adam Turnquist, chief technical strategist for LPL Financial. Despite the Friday drop, the market is moving closer to another standout annual finish, with the S&P 500 on track for a gain of around 25% in 2024. This would mark the first time since 1997-1998 that the market has seen consecutive yearly gains of over 20%. The gains have been driven by optimistic economic data, strong consumer spending, a robust labor market, and easing inflation.
The stream of upbeat economic data and easing inflation prompted a reversal in the Federal Reserve’s interest rate policy this year, with three rate cuts in 2024. Expectations for further rate cuts have also contributed to market gains. However, concerns remain about inflation remaining above the central bank’s target of 2%, which could hinder additional rate cuts. The uncertainties heading into 2025 include the labor market’s trajectory and shifting economic policies under incoming President Donald Trump. Worries have arisen about potential inflation increases due to Trump’s preferences for tariffs and other policies, leading to concerns about higher government debt and trade difficulties.
In Asia, Japan’s benchmark index surged as the yen weakened against the dollar, while South Korean stocks fell following an impeachment vote against the country’s acting leader. European markets gained ground, and bond yields remained relatively steady, with the 10-year Treasury yield rising slightly. Wall Street anticipates more economic updates next week, including reports on pending home sales, home prices, U.S. construction spending, and manufacturing activity snapshots. The market will continue to monitor developments in regulatory policy under the incoming Trump administration, which is expected to have a more relaxed approach to deals like the Amedisys and UnitedHealth Group transaction. The extension of the deal deadline signals a potential shift in antitrust concerns under the new administration.
