Stocks on Wall Street experienced a decline on Friday, heading toward their first weekly loss in four weeks. The S&P 500 fell by 0.8% in afternoon trading, while the Dow Jones Industrial Average dropped 234 points, or 0.5%, as of 1:50 p.m. Eastern time. The Nasdaq Composite saw a more significant decrease, falling 1.4%. The downturn was primarily driven by technology stocks, particularly major players whose high valuations significantly impact market trends.
Despite a greater number of gainers than losers within the S&P 500, several key tech stocks weighed heavily on the index. Notably, Nvidia experienced a 2.2% decline, and Broadcom fell by 4.2%, contributing to the overall downward momentum. Investors remained focused on the latest quarterly reports from U.S. companies, which have been critical in assessing market performance.
Among the companies reporting earnings, Block, known for its Square and Cash App services, saw its stock plummet 8.4% after releasing disappointing results. In contrast, Peloton rose by 7.7% after exceeding earnings expectations. Expedia Group also performed well, surging 17.3% following a strong quarterly earnings report. With over 90% of companies in the S&P 500 having reported earnings, data from FactSet indicated that many exceeded Wall Street’s growth expectations, particularly within the tech sector.
Corporate profits and forecasts are under close scrutiny as investors assess whether the market’s current high valuations are justified. This analysis has become increasingly important due to the absence of other economic data resulting from the ongoing U.S. government shutdown, which is now the longest on record. Notably, the monthly employment data for October is unavailable, as is the previously anticipated data for September. The lack of employment statistics is particularly concerning given the prevailing signs of a weakening job market.
In the midst of this uncertainty, Wall Street has access to some private sources of economic data. The latest insights came from the University of Michigan, which reported a sharp decline in consumer sentiment, reaching a three-year low. Economists had previously anticipated a slight increase in sentiment. In a note to investors, Eugenio Aleman, chief economist for Raymond James, highlighted that consumers are beginning to express concerns regarding the potential economic impact of the government shutdown.
The survey also indicated that inflation expectations have edged slightly higher. The absence of government data on consumer prices and other inflation measures due to the shutdown complicates the situation. Inflation remains a critical issue, especially in light of ongoing trade tensions that could exacerbate rising prices.
The Federal Reserve is facing challenges as it considers its future approach to interest rates. With Wall Street’s gains this year largely attributed to expectations for rate cuts that could stimulate economic activity by reducing borrowing costs, the Fed has already lowered its benchmark rate twice this year. Yet, cutting rates could potentially aggravate inflation, which remains stubbornly above the central bank’s target of 2%.
Despite these concerns, Wall Street is largely betting on another interest rate cut during the Fed’s December meeting, with forecasts suggesting a 70% probability of this outcome, according to CME FedWatch. In the bond market, Treasury yields edged lower, with the yield on the 10-year Treasury dropping to 4.07% from 4.09% and the two-year Treasury yield falling to 3.54% from 3.56%.
Global markets mirrored the decline seen in the U.S. on Friday. European markets fell, while Asian markets also closed lower. In China, data revealed that exports contracted by 1.1% in October, with shipments to the United States plummeting by 25% compared to the previous year. Nevertheless, economists remain optimistic about a potential recovery in Chinese exports following an agreement between U.S. President Donald Trump and Chinese leader Xi Jinping to de-escalate the ongoing trade conflict.
This week’s market movements reflect a complex interplay of corporate performance, economic data shortages, and broader geopolitical factors, all contributing to a cautious sentiment on Wall Street.
