(Bloomberg) — A selloff in the world’s largest technology companies weighed on stocks in the final stretch of a stellar year.
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In another session of thin trading volume — which tends to amplify moves — the S&P 500 lost 1.6% and the Nasdaq 100 fell 2%. All major industries declined, with Tesla Inc. leading the way. And Nvidia Corp. suffered significant losses in their shares. This comes after a rally that saw a group of tech giants dubbed the “Gig Seven” account for more than half of the US stock index’s performance in 2024.
“I think Santa has already come, but that’s me. Have you seen the performance this year? It’s Friday, next week is another holiday-shortened week, trading volumes will be light, and moves will be exaggerated,” said Kenny Polcari at SlateStone Wealth. Don’t make any big investment decisions this week.”
For The Sevens Report’s Tom Isay, sentiment is no longer euphoric and markets will start the year with regular investors more balanced in their expectations – which will be “a good thing because it reduces air pocket risk”, but advisers have largely ignored the recent volatility.
“It’s fair to say that this recent decline in stocks has taken the euphoria out of retail investors, but it has not affected advisor sentiment,” he said. “And if we get bad political news or Fed officials signal a ‘pause’ in interest rate cuts, that will likely cause more sharp short-term declines.”
The S&P 500 and Nasdaq 100 nearly erased this week’s gains. The Dow Jones Industrial Average fell 1.2%. Bloomberg’s measure of “Gig Seven” stocks fell 2.7%. The Russell 2000 index of small stocks fell 2.2%.
The yield on the 10-year Treasury note rose 2 basis points to 4.61%. Bloomberg Dollar Spot Index fluctuates.
Funds linked to several of the key themes that have driven markets and money flows over the past three years stumbled during the week ending December 25, according to data compiled by EPFR.
Redemptions from cryptocurrency funds reached a record high, while technology sector funds extended their longest streak of outflows since the first week of 2023, the company said.
The rise in US stocks this year has pushed expectations for stocks so high that they may become the biggest obstacle to further gains in the new year. The bar is even higher for technology stocks, given their massive rise this year.
A recent Bloomberg Intelligence analysis found that analysts estimate the sector’s earnings will grow about 30% next year, but technology’s share of the S&P 500’s market cap suggests growth expectations closer to 40% may be built into the stock.
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