Concerns about overvalued AI stocks have led to several sell-offs in recent weeks and put the Nasdaq on track for its fifth session of declines, the index’s longest losing streak since April. It was also set for its second straight week of losses.“People have seen the overvaluation story, it’s been going on for a while, but they’re finally acting on it. Momentum trading is starting to relax,” said Joe Saluzzi, partner and co-founder of Themis Trading.
“If it comes to that, as you saw this morning, they will take them all out. There is no security trade there.’
Shares of Applied Materials fell 6.3% to the bottom of the S&P 500 after the company raised expectations that China will make weaker spending next year amid tighter U.S. export curbs. Most semiconductor-linked stocks fell, with the broader index down 3%. Megacap technology shares were lower, while the Roundhill Magnificent Seven ETF fell 2%. Information technology stocks on the S&P 500 also lost 2%. The three major U.S. stock indexes posted their steepest one-day declines in more than a month last session.
The CBOE Volatility Index, Wall Street’s fear gauge, previously hit a one-week high and was last up 3 points at 23.
Meanwhile, a growing number of Fed policymakers showed reluctance to further easing. St. Louis President Alberto Musalem urged caution, while Cleveland Chief Beth Hammack said restrictive policies would help tackle inflation. Neel Kashkari of Minneapolis told Bloomberg News on Thursday that he opposed the October rate cut.
According to CME Group’s FedWatch tool, expectations for a 25-point rate cut fell to 53% in December, down from last week’s 67%.
Investors will sift through a new set of comments from Fed officials as the day progresses.
The historic U.S. government shutdown, which ended Thursday, led to a drought in economic data, blindsided the Fed and traders and reignited concerns about the health of the labor market and the inflation outlook.
Despite the reopening, the data gaps are likely to remain permanent, with the White House casting doubt on the release of some October reports.
On the trade front, the Swiss government said US tariffs on Swiss goods will be cut from 39% to 15%.
Walmart, among others, fell 2.2% after announcing that CEO Doug McMillon would retire next year.
Warner Bros. Discovery gained 2.4%. The entertainment company said it had changed CEO David Zaslav’s employment contract during a strategic review of its operations.
Cidara Therapeutics more than doubled after Merck said it would acquire the company in a deal worth nearly $9.2 billion.
Declining issues outnumbered advancers by a 2.86-to-1 ratio on the NYSE and by a 3.8-to-1 ratio on the Nasdaq.
The S&P 500 recorded seven new highs over the past 52 weeks and six new lows, while the Nasdaq Composite recorded eight new highs and 186 new lows.
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