NEW YORK – Stock indexes dropped significantly on Friday, especially in the tech sector. Investors are feeling cautious about artificial intelligence investments, while the dollar gained some strength and U.S. Treasury yields increased.
The rise in yields followed comments from Federal Reserve officials who opposed a rate cut earlier in the week, expressing ongoing concerns about high inflation. This situation has put additional pressure on stock prices.
Technology shares fell 2.9% in the S&P 500 as worries persisted. Oracle, a cloud computing firm, saw a decline of 4.5% after a previous drop of about 11%. Concerns about profitability among chipmaker Broadcom led to a staggering 11.4% drop in its stock. Nvidia, a leader in AI technology, fell 3.3%.
Bruce Zaro, a managing director at Granite Wealth Management, commented that the ongoing disappointment in technology stocks and AI investments is contributing to the market’s struggles. He noted that typically, the holiday season is a strong period for stocks, so this downturn is particularly striking.
Despite the Fed’s rate cut of 25 basis points, there is a mixed sentiment regarding future cuts. While investors are hopeful for more cuts in 2026, there are worries about a declining labor market and persistently high inflation. U.S. jobless claims showed a significant uptick, the highest in around four and a half years.
The Bank of England is expected to cut rates next Thursday, while the European Central Bank is likely to keep them steady, though some traders speculate on future hikes. The Bank of Japan is anticipated to raise its interest rates as well.
The Dow Jones dropped 245.96 points, or 0.51%, closing at 48,458.05. The Nasdaq Composite fell 398.69 points (1.69%), ending at 23,195.17.
Global stock indices were also down, with the MSCI index reducing by 0.63% to 1,008.88 and the Pan-European STOXX 600 finishing 0.53% lower.
Yields on the U.S. 10-year Treasury note rose following two weeks of declines, with the benchmark yield at 4.192%, marking an upward trend.
U.K. and Currency Moves
The U.S. dollar has shown strength against major currencies, even with predictions of continued declines over the next few weeks due to expectations for Fed rate cuts.
The British pound weakened slightly after economic data revealed a surprising contraction in the U.K. economy. It slipped 0.2% to $1.3375 but remains close to its recent highs. The dollar also gained 0.2% against the yen ahead of a crucial Bank of Japan meeting.
Copper prices plummeted more than 3% after reaching record highs, fueled by fears of a potential AI bubble burst affecting asset values. The benchmark copper price dropped to around $11,537.50.
As for oil, prices fell due to oversupply concerns, with U.S. crude down to $57.44 a barrel.
