Wall Street experienced a downturn on Friday, with major indices poised for their first weekly loss in four weeks. The S&P 500 index declined by 0.8% during afternoon trading, while the Dow Jones Industrial Average dropped by 234 points, or 0.5%, as of 1:50 p.m. Eastern time. The Nasdaq composite faced a more significant fall, decreasing by 1.4%.
Technology stocks, particularly some high-profile companies with substantial market valuations, played a significant role in dragging the market down. Notably, shares of Nvidia fell by 2.2%, and Broadcom saw a decline of 4.2%. Despite these losses, there were more gainers than losers within the S&P 500, highlighting the mixed performance of the market.
Investors remained focused on the latest quarterly reports and projections from U.S. companies. A notable performer was Expedia Group, which surged by 17.3% after surpassing analysts’ earnings expectations. In contrast, Block, the payments company behind Square and Cash App, saw its stock plummet by 8.4% following disappointing results. Peloton also reported better-than-expected results, leading to a 7.7% increase in its share price.
With over 90% of companies in the S&P 500 having reported earnings for their latest quarter, many have exceeded Wall Street’s growth expectations, particularly in the technology sector, according to data from FactSet. As corporate profits and forecasts come under scrutiny, investors are assessing whether current market valuations are justified.
The ongoing U.S. government shutdown has compounded uncertainties, leading to a lack of critical economic data. The shutdown is now the longest on record, resulting in the absence of monthly employment data for both September and October. This is particularly concerning as the job market has shown signs of weakening.
Investors received some insight from the University of Michigan’s monthly consumer sentiment report, which indicated a sharp decline in consumer sentiment, hitting a three-year low. Economists had expected a slight increase in sentiment, but the report revealed that “consumers are starting to get concerned about the potential effects of the government’s shutdown on economic activity,” as noted by Eugenio Aleman, chief economist for Raymond James.
Inflation expectations also edged slightly higher in the report, further complicating matters for the Federal Reserve. The absence of government data on consumer prices and other inflation measures has left Wall Street seeking clarity in a time of persistent inflationary pressures. The Federal Reserve has already lowered its benchmark interest rate twice this year in an effort to stimulate economic growth amid a weakening job market. However, cutting rates could exacerbate inflation, which remains stubbornly above the central bank’s target of 2%.
Despite the current volatility, Wall Street is still betting on further interest rate cuts, with investors forecasting a 70% likelihood of a cut during the Fed’s December meeting, according to CME FedWatch.
In the bond market, Treasury yields edged lower, with the yield on the 10-year Treasury falling to 4.07% from 4.09% late Thursday. The yield on the two-year Treasury decreased to 3.54% from 3.56%.
Global markets mirrored Wall Street’s decline, with European markets falling and Asian markets closing lower. In a concerning report from China, exports contracted by 1.1% in October, with shipments to the United States decreasing by 25% compared to the previous year. Nevertheless, economists anticipate a recovery in Chinese exports following recent agreements between U.S. President Donald Trump and Chinese leader Xi Jinping to de-escalate trade tensions.
As Wall Street navigates these challenges, investors remain vigilant, assessing the implications of corporate earnings, economic data, and global developments on the market’s future trajectory.
