Technology’s retreat drags Wall Street stocks down

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US technology stocks slid on Friday as investors turned away from companies that have led the market higher for much of this year.

The S&P 500, Wall Street’s main stock index, fell 1.1% on Friday, while the tech-heavy Nasdaq Composite fell 1.5%. Elon Musk’s electric car manufacturer Tesla was one of the biggest laggards, down 5%, while chipmaker Nvidia decreased by 2.1%.

“I watched it maybe 30 different times [market indicators] and today they are all down,” said Jack Ablin, chief investment officer at Cresset Capital. “This is just extensive sales without much enthusiasm.”

Technology stocks have surged this year as investors bet artificial intelligence will boost demand for everything from servers to microchips. The gains accelerated after Donald Trump’s election victory in November on bets that the president-elect will introduce more business-friendly policies when his term begins next month.

However, the sector has become tougher in recent weeks as investors reassess their best performers of year-end. The Federal Reserve also sparked controversy last week when it forecast just two 24-point interest rate cuts next year, compared with a September forecast of four, as officials worried about the risks is increasing, causing inflation to exceed the central bank’s 2% target.

The hawkish forecasts have pushed up long-term U.S. borrowing costs, with the 10-year Treasury yield rising to 4.63% on Friday, from a September low of around 3.6 %. Higher yields often overshadow the appeal of holding stocks in fast-growing companies.

Citigroup analysts said Friday that while they still forecast the S&P 500 to rise about 10% from current levels by the end of next year, they expect “more volatility in the bull market ahead”.

Bank of America noted that this year’s share price gains relative to corporate profits are “setting the bar high for fundamentals next year and even the year after.” According to FactSet data, the S&P 500 trades at about 22.2 times next year’s expected earnings, compared with an average over the past decade of 18.1.

“Even with that volatile Friday, the market was still higher than it was on Monday,” said Greg McBride, chief financial analyst at Bankrate.com.

“Markets don’t go straight, and pullbacks often serve as the foundation for the next market rally,” he said.

The S&P 500 is still up 25% year to date even after Friday’s decline, roughly on par with last year’s gain.

Howard Silverblatt at S&P Dow Jones said the so-called Great Seven big tech stocks — Apple, Microsoft, Meta, Amazon, Alphabet, Nvidia and Tesla — delivered about half the total return of the S&P 500, including the dividends, this year. Index.

However, all shares of Magnificent 7 fell slightly on Friday.

Trading activity is typically lighter than usual during the holiday period, which can exacerbate volatility.