Volatility Grips Wall Street as Tech Shares Stumble and Investors Digest Job Market Data
A week marked by mixed signals and a pause in the tech rally culminated in stock market losses on Friday. All three major indexes – the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite – ended the week lower, with the tech-heavy Nasdaq experiencing the steepest decline of 1.2%.
The information technology sector bore the brunt of the selling pressure on Friday. Chipmakers like Broadcom, Intel, and Microchip Technology witnessed significant losses, with Broadcom falling short of Wall Street's profit expectations. The "Magnificent Seven," a group of high-flying tech stocks that have propelled the market higher for months, also faced a downbeat week. All except Nvidia and Meta Platforms closed lower, with Nvidia experiencing a dramatic reversal, surging over 5% early in the session before plummeting 5.6% by the closing bell. Despite the drop, Nvidia remains up a staggering 80% for the year.
Analysts attributed this volatility to the rapid ascent of these tech giants. "Such volatility is likely to become the norm, not the exception, for stocks experiencing such explosive growth," commented Art Hogan, chief market strategist at B. Riley Wealth Management. "The exuberance surrounding these stocks has been breathtaking, but a correction was inevitable."
Friday's eagerly awaited jobs report provided a mixed picture of the U.S. economy. While employers added a robust 275,000 jobs in February, surpassing economist expectations, the unemployment rate ticked up to 3.9%. Additionally, wage growth moderated, and some previously strong job creation figures were revised downward.
Despite these mixed signals, many analysts remained optimistic. They believe the combination of strong job gains and decelerating wage inflation empowers the Federal Reserve to combat inflation without triggering a recession. "The labor market is functioning well, and wage pressures are easing," stated Jamie Cox, managing partner at Harris Financial Group. "This positions the Fed to successfully navigate its dual mandate of maximizing employment and maintaining price stability."
The S&P 500 initially touched record highs on Friday before reversing course and closing in the red. Investors meticulously scrutinizing the unemployment rate, which remains historically low, may have contributed to this intraday shift, according to a report by Interactive Brokers senior economist José Torres. He further highlighted the potential risk of a deteriorating labor market before the Fed initiates rate cuts, given the moderation in wage growth and the uptick in unemployment.
Wall Street anticipates the Fed's June meeting as a potential turning point for interest rates, with the first potential rate cut of the cycle looming. Following the jobs report, interest-rate derivatives traders upped their bets for a June rate cut to roughly 60%, a significant increase from around 40% a month prior, according to data from CME Group.
Treasury yields dipped slightly, with the benchmark 10-year note closing at 4.088%. Investors will have their next opportunity to assess inflation on Tuesday with the release of February's consumer-price index.
Costco Wholesale, the S&P 500's biggest loser on Friday, plummeted 7.6% after its quarterly sales fell short of analyst estimates. Meanwhile, Bitcoin continued its record-breaking run, closing at a fresh 4 p.m. high of $69,294. Gold prices also extended their record-setting week, settling at $2,178.60 an ounce.
While the U.S. market experienced some turbulence, European markets painted a brighter picture. The Stoxx Europe 600 closed the week at a record high. However, Asian markets were less fortunate. Japan's Nikkei 225 slipped on the week, while Hong Kong's Hang Seng dropped 1.4%.
With the release of the consumer-price index on Tuesday, investors will be keenly observing inflation data to gauge the Fed's next move. This week promises to be action-packed, potentially shaping market sentiment and influencing investment decisions in the weeks to come.
