Stocks Rocked by Late-Week Swoon in Tech Giants: Markets Wrap
(Bloomberg) -- A selloff in the world’s largest technology companies hit stocks in the final stretch of a stellar year.
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In another session of slim trading volume — which tends to amplify moves — the S&P 500 lost 1.1% and the Nasdaq 100 slipped 1.4%. While every major industry succumbed to Friday’s slide, tech megacaps bore the brunt of the selling. That’s after a torrid surge that saw the group dubbed “Magnificent Seven” account for more than half of the US equity benchmark’s gains in 2024.
“I think Santa has already come. Have you seen the performance this year?” said Kenny Polcari at SlateStone Wealth. “It’s Friday, next week is another holiday-shortened week, volumes will be light, moves will be exaggerated. Don’t make any major investing decisions this week.”
Steve Sosnick at Interactive Brokers says that while Friday was shaping up to be a quiet holiday-season day, he’s been fielding more inquiries than expected.
“The best I can figure out is that there are large accounts, pension funds and the like, who need to rebalance their holdings before year-end,” he said.
The S&P 500 and the Nasdaq 100 trimmed this week’s gains. The Dow Jones Industrial Average slipped 0.8% Friday. A gauge of the “Magnificent Seven” sank 2%, led by losses in Tesla Inc. and Nvidia Corp. The Russell 2000 index of small caps dropped 1.6%.
The yield on 10-year Treasuries rose four basis points to 4.62%. The Bloomberg Dollar Spot Index wavered.
Funds tied to several of the major themes that have driven markets and fund flows over the past three years stumbled during the week ending Dec. 25, according to data compiled by EPFR.
Redemptions from cryptocurrency funds hit a record high while technology sector funds extended their longest outflow streak since the first week of 2023, the firm said.
This year’s rally in US equities has driven the expectations for stocks so high that it may turn out to be the biggest hurdle for further gains in the new year. And the bar is even higher for tech stocks, given their massive surge in 2024.
A Bloomberg Intelligence analysis recently found that analysts estimate a nearly 30% earnings growth for the sector next year, but tech’s market-cap share of the S&P 500 index implies closer to 40% growth expectations may be embedded in the stocks.
“The market’s largest companies and other related technology darlings are still being awarded significant premiums,” said Jason Pride and Michael Reynolds at Glenmede. “Excessive valuations leave room for downside if earnings fail to meet expectations. Market concentration should reward efforts to regularly diversify portfolios.”
