New York: On Friday, U.S. stocks took a tumble, led by tech behemoths that have been the driving force behind this year’s market surge. Meanwhile, investors remained in a state of contemplation over the interest rate trajectory in anticipation of the upcoming Federal Reserve meeting.
Traders tempered their expectations of a June rate cut by the Fed following this week’s revelation of inflation data surpassing expectations.
“We seem in a period here where everyone knows rates eventually will be lowered. The expectation of when it happens keeps getting slightly pushed back, but investors still believe it will happen,” remarked Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey. “It’s been a back-and-forth market as people reposition and consider whether some of the real winners have just gone a little bit too far, so you’re seeing them trade off.”
Shares of Adobe (ADBE.O) plummeted 13.7% after forecasting second-quarter revenue below analysts’ estimates, citing competition and weak demand for its AI-integrated photography, illustration, and video.
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The technology sector took the hardest hit, with the S&P 500 technology index (.SPLRCT) down 1.3% on the day. Microsoft (MSFT.O) also stumbled, falling 2.1% and ranking among the largest drags on the index.
The semiconductor index (.SOX) slipped 0.5% on Friday, marking its most substantial weekly percentage decline since early January. Eyes are now fixed on the Nvidia (NVDA.O) GTC developer conference scheduled for March 18 to 21, with anticipation for AI-related announcements.
The Dow Jones Industrial Average (.DJI) declined by 190.89 points, or 0.49%, closing at 38,714.77. The S&P 500 (.SPX) shed 33.39 points, or 0.65%, ending at 5,117.09, while the Nasdaq Composite (.IXIC) dropped 155.36 points, or 0.96%, to 15,973.17.
Although major indexes saw slight declines for the week, with the Dow down 0.02%, the S&P 500 down 0.1%, and the Nasdaq down 0.7%, the small-cap Russell 2000 index (.RUT) took a more pronounced dip, falling 2.1%.
Friday marked the simultaneous expiry of quarterly derivatives contracts, known as “triple witching,” which typically amplifies trading volume. Indeed, Friday’s volume on U.S. exchanges hit the year’s highest, with 18.76 billion shares traded, significantly surpassing the 20-day average of about 12.4 billion.
Brent Kochuba, founder of analytic service SpotGamma, noted that the week started with investors favoring call contracts, indicating a bullish sentiment. However, the failure of the S&P 500 to surge quickly eroded the value of upside call options, exerting further downward pressure on the market.
Despite the AI-driven rally on Wall Street stalling, the S&P 500 remains up 7.3% year-to-date.
Among other notable declines, Ulta Beauty (ULTA.O) fell 5.2% after projecting full-year profit below Wall Street estimates due to elevated supply-chain costs and increased promotions denting its margins.
With next week’s Fed meeting looming, all eyes are on any hints regarding the central bank’s outlook for rate cuts.
