Wall Street on Friday posted its worst week since mid-April, as the exodus from technology stocks continued over the past few days, sparked by Thursday’s consumer inflation report.
The technology-heavy Nasdaq Composite Index (Compound: Indian) I recorded the first three days A losing streak since June 24, Decrease by 0.81% To close at 17,726.94 points. The Standard & Poor’s 500 Index (sb 500) Down 0.71% To close at 5,505.09 points, while the Dow Jones Industrial Average (DJI) Decreased by 0.93% To settle at 40,287.53 points.
Of the 11 sectors in the S&P 500, nine ended in the red, with energy and technology the biggest losers. Healthcare and utilities were among the gainers.
During the week, the NASDAQ (COMP:IND) was 3.65% decrease S&P (SP500) Index 1.96%Conversely, the Dow Jones Industrial Average (DJI) was Up 0.72%.
“The lazy days of summer are upon us, and the laziest people in town are the buyers, who have essentially headed to the beach with their lucrative business gains since October 2022,” Alex King, head of investment group at Cestrian Capital Research, told Seeking Alpha. “We believe there are more corrections to come as the third quarter progresses.”
“We don’t think this is the end of the world or the Great Reckoning, just a seasonal sell-off ahead of the election,” King added. “We think all indicators will move higher from here by the end of the year; in the meantime, we think hedging is the investor’s friend as the quarter continues.”
Today’s headlines were largely dominated by a worldwide outage affecting companies running Microsoft (MSFT). The glitch was found to be caused by a bug in a Windows hosting content update released by cybersecurity provider CrowdStrike (CRWD).
CrowdStrike (CRWD) shares fell as Oppenheimer called the outage a “major blow” to the company’s reputation, while Wedbush highlighted an opportunity for competitors to step in and take advantage.
The Magnificent 7 stocks, which have been among the drivers of Wall Street’s rally, had another mixed performance on Friday, with most of them falling. Several members of the heavyweight club are scheduled to report quarterly results in the next two weeks amid sky-high expectations.
The weak consumer inflation report released last Thursday played a big role in boosting expectations of a 25 basis point rate cut by the Federal Reserve in September, and it also gave investors confidence to start moving away from big tech companies and into other assets such as defensive sectors, value sectors and small-cap stocks.
See below the chart from Bespoke Investment Group showing this week’s turnover:
Netflix Inc (NFLX) got some attention on Friday, a day after the U.S. streaming giant reported quarterly results. The company beat revenue and profit, while membership in its closely watched ad-supported segment grew 34% quarter-over-quarter. Executives on the conference call reiterated their commitment to growing margins.
Speaking of earnings, Dow Jones 30 constituents Travelers (TRV) and American Express (AXP) reported their quarterly figures. Shares of the insurer fell, despite reporting record net premiums in the second quarter and offsetting large catastrophe losses from severe storms. Meanwhile, shares of the credit card issuer also fell after its revenue missed estimates due to a slowdown in consumer spending.
Turning to fixed income markets, US Treasury yields rose. The yield on the 30-year US Treasury note (US30Y) rose 3 basis points to 4.45%, while the yield on the 10-year US Treasury note (US10Y) rose 4 basis points to 4.24%. The less interest-rate-sensitive 2-year US Treasury note (US2Y) rose 3 basis points to 4.51%.
See how Treasury yields have performed across the curve on Seeking Alpha’s bonds page.
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