NEW YORK (AP) — Wall Street closed out its worst week since June with another day of churning trading on Friday, as big technology stocks resumed their suddenly weakened ways.
The S&P 500 rose 1.78, or 0.1 per cent, to 3,340.97, but only after a roller-coaster day where a gain of 0.9 per cent gave way to a loss of 0.9 per cent. It kept swinging up and down after that, the latest examples of the lightning-quick shifts in momentum that have rocked Wall Street recently. Through the tumultuous week, the S&P 500 lost 2.5 per cent to clinch its first back-to-back weekly loss in four months.
The Nasdaq composite, which includes many of the superstar tech stocks that have been the focus of the market’s recent selling, lost 66.05, or 0.6 per cent, to 10,853.55 after also flip-flopping between gains and losses. Its 4.1 per cent drop for the week was its worst since market panic was peaking about the coronavirus and stocks hit a bottom in late March.
The Dow Jones Industrial Average rose 131.06, or 0.5 per cent, to 27,665.64, but not before careening between a gain of 294 points and a loss of 86 points.
Analysts expect swings to continue to rattle markets for weeks, if not months, as investors wait for more clarity on several key issues. At the head of the list of uncertainties is what to do with Big Tech stocks, which critics have long said were due for a slide after soaring too high through the summer.
“The technology sell-off continues,” said Chief Equity Market Strategist at Federated Hermes Phil Orlando. “We don’t think this is anything more than a technical pullback that’s cleansing. It’s healthy and was anticipated.”
Apple, Amazon and others soared through the pandemic as their businesses boomed despite the recession. The coronavirus accelerated a shift to online life that’s benefitted them, and a pile-on of investors into Big Tech sent their share prices soaring to levels that critics said were overvalued.
Apple had a nearly irrepressible run this summer where it rose in 12 out of 13 weeks. Zoom Video Communications surged above USD450 per share earlier this month after starting the year at less than USD70.
That all came to an abrupt halt last week. Worries that the stocks had gotten overheated helped send the S&P 500 to its worst three-day run in nearly three months, and the Nasdaq composite slid 10 per cent. Tech stocks recovered a bit on Wednesday, and they seemed to regain their stride on Thursday morning, only for an afternoon swoon to batter them again.
On Friday, tech stocks again swung from gains to losses. The fluctuations came even after Oracle reported stronger profit for its latest quarter than analysts expected. After leaping as much as 7.9 per cent in the morning, its stock slipped 0.6 per cent.
Big Tech and the high-growth area of the stock market “just got ahead of itself,” said Chief Investment Officer of private wealth at Glenmede Jason Pride. “It doesn’t matter how it got there, it matters that it got there and now we’re kind of deflating that overvaluation a little bit.”
After rising as much as 1.5 per cent shortly after trading began, Apple fell back to a loss of 1.3 per cent. It dropped 7.4 per cent over the week, its worst since March. Movements for it and other Big Tech stocks matter more than ever for broad market indexes because their immense size means they can influence the S&P 500 almost by themselves. Five Big Tech companies make up nearly 23 per cent of the index’s entire value.
One big factor that remains in the stock market’s favour is the Federal Reserve, which continues to pump aid into the economy. It has slashed short-term interest rates to record lows and bought up all kinds of bonds to support markets. It also said recently it will keep delivering stimulus even if inflation rises above its target level, as long as inflation had been well under it before then.
A report on Friday showed that inflation remains low, though it was higher than economists expected. Consumer prices rose 1.3 per cent in August from a year earlier, a shade above the 1.2 per cent that investors were expecting.
The yield on the 10-year Treasury slipped to 0.66 per cent from 0.68 per cent late Thursday.
Unprecedented amounts of aid from Congress, along with the Federal Reserve, also helped the stock market halt its nearly 34 per cent plummet in late March.
But it looks less likely by the day that Congress will approve more support for the limping economy before the November elections, even though investors say such stimulus is crucial after unemployment benefits and other stimulus has expired. Senate Democrats on Thursday shot down a scaled-back package proposed by Republicans, saying it shortchanged too many needs.