BY COMFORT OGBONNA
U.S. stocks ended sharply lower on Friday, with the S&P 500 and the Nasdaq each falling more than 1%, as investors rotated out of technology stocks amid renewed concerns about an artificial intelligence-driven bubble and mounting pressure from rising U.S. Treasury yields. The pullback followed a strong rally earlier in the week and came as several Federal Reserve officials pushed back against the idea of further monetary easing, citing persistent inflation risks.
Treasury yields moved higher after a group of Federal Reserve policymakers who opposed this week’s interest rate cut publicly warned that inflation remains elevated and that it may be premature to lower borrowing costs further. Their comments unsettled equity markets, particularly growth-oriented technology stocks, which tend to be more sensitive to higher yields.
The selloff was led by sharp declines in major technology names tied to the AI boom. Broadcom shares plunged 11.4% after the chipmaker cautioned that future profit margins could come under pressure, reigniting fears that massive investments in artificial intelligence infrastructure may not deliver the returns investors have been expecting. The warning cast a shadow over the broader semiconductor sector and raised fresh questions about the sustainability of soaring AI-related valuations.
Oracle also weighed heavily on sentiment, with its shares falling 4.5% on Friday following an almost 11% drop the previous session. The cloud software company has been under pressure since issuing a weaker-than-expected financial outlook. Although Oracle denied a report suggesting delays at its data centers serving OpenAI, investor confidence remained fragile and the stock continued to slide.
The broader market weakness was exacerbated by the fact that both the S&P 500 and the Dow Jones Industrial Average had closed at record highs on Thursday, prompting some investors to lock in profits. With key economic data on employment and inflation due in the coming week, many market participants adopted a more cautious stance.
Anthony Saglimbene, chief market strategist at Ameriprise, said the pullback was not unexpected after a strong run. He noted that following record closes and signs of disruption within the AI trade, investors were increasingly shifting toward more defensive areas of the market. He added that uncertainty around upcoming economic reports was also contributing to the day’s selling pressure.
Attention is now turning to a busy week of data releases from the Labor Department, including nonfarm payrolls, consumer inflation and retail sales figures. These reports are expected to provide a clearer picture of the U.S. economy after the October government shutdown delayed the release of several official data points. According to Saglimbene, markets are showing caution ahead of these potentially market-moving numbers.
By the closing bell, the Nasdaq Composite fell 398.69 points, or 1.69%, to 23,195.17, while the S&P 500 dropped 73.59 points, or 1.07%, to 6,827.41. For the week, the S&P 500 declined 0.63% and the Nasdaq lost 1.62%. The Dow Jones Industrial Average slipped 245.96 points, or 0.51%, on the day to 48,458.05, though it still managed a weekly gain of 1.05%.
Broadcom was the single biggest drag on the S&P 500, followed closely by AI heavyweight Nvidia, which fell 3.3%. The weakness spread across the semiconductor space, with every stock in the Philadelphia semiconductor index closing lower. The index sank 5.1%, marking its worst session since October 10.
Other AI-linked companies also suffered steep losses. SanDisk tumbled 14.7%, making it the S&P 500’s biggest percentage decliner of the session. Investors also pulled back from AI infrastructure plays, with CoreWeave dropping 10.1% and Oklo sliding 15.1%.
Overall, six of the S&P 500’s 11 industry sectors ended the day in negative territory. Technology stocks led the declines, with the sector falling 2.9% for its steepest one-day drop since October 10. In contrast, defensive consumer staples outperformed, rising 0.9% as investors sought relative safety.
There were a few bright spots amid the broader weakness. Lululemon Athletica shares surged 9.6% after the athletic apparel maker raised its full-year profit forecast and announced that CEO Calvin McDonald would be stepping down. Costco Wholesale, however, finished the session little changed despite reporting better-than-expected first-quarter revenue and profit, as shoppers continued to spend on both essentials and discretionary items ahead of the holiday season.
Market breadth was decisively negative. On the New York Stock Exchange, declining stocks outnumbered advancers by a ratio of 2.23 to 1. On the Nasdaq, 3,315 stocks fell compared with 1,419 that rose, reflecting a similar imbalance. The S&P 500 recorded 32 new 52-week highs and five new lows, while the Nasdaq Composite posted 136 new highs and 98 new lows.
Trading activity was elevated, with 18.08 billion shares changing hands across U.S. exchanges, above the 20-session average of 17.25 billion shares, underscoring the intensity of Friday’s selloff.
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