Rosalind Evans
Wall Street’s major indexes experienced mixed performance on Friday, with the Nasdaq recovering from earlier losses as mega-cap tech stocks showed resilience. Investors also processed stronger-than-expected U.S. business activity data, contributing to the overall market dynamics.
Megacap Tech Stocks Lead Recovery
In Friday’s session, mega-cap tech stocks like Microsoft, Alphabet, Amazon.com, and Apple saw gains between 0.7% and 2%. This recovery lifted the tech-heavy Nasdaq and helped the S&P 500 pare early losses. The S&P 500 Technology index reversed its early losses, rising 0.1%, while financial stocks were the day’s biggest decliners.
U.S. Business Activity and Economic Data
June saw a rebound in U.S. business activity, reaching a 26-month high amid improved employment numbers. The Flash services PMI increased to 55.1, surpassing expectations of 53.7, while manufacturing PMI edged up to 51.7 against an expected dip to 51. These figures suggest a sustained slowdown in inflation, offering a positive outlook for the economy.
May home sales fell slightly to a seasonally adjusted annual rate of 4.11 million units, just below the expected 4.10 million units. Despite this, the market is adjusting to the possibility of prolonged higher interest rates, as indicated by Federal Reserve officials. “It certainly looks like at this point the Fed is going to hold tight for a while … the market is slowly adjusting to that reality,” said Lamar Villere, portfolio manager with Villere & Co.
Market Reactions and Predictions
Despite mixed economic signals, money markets are pricing in a 58% chance of a 25-basis point rate cut in September, expecting about two rate cuts this year, according to LSEG’s FedWatch data. AI chip firm Nvidia slipped 0.5%, while semiconductor stocks like Qualcomm, Broadcom, and Micron Technology fell between 0.2% and 2%.
The significant gains on Wall Street since late 2023 have been driven mainly by stocks linked to artificial intelligence, raising concerns about the sustainability of their high valuations. Analysts are closely monitoring these trends to gauge future market stability.
Fundamental Movements and Market Volatility
Friday’s session also marked the expiry of quarterly derivatives contracts tied to stocks, index options, and futures, known as “triple witching,” adding to market volatility. As of midday, the Dow Jones Industrial Average was down 9.57 points at 39,125.19, the S&P 500 was up 2.04 points at 5,475.21, and the Nasdaq Composite was up 45.86 points at 17,767.44.
In other significant movements, Spirit AeroSystems rose 6.1% following reports that Boeing is nearing a deal to buy back the airplane parts supplier. Sarepta Therapeutics soared 35.2% after the FDA approved expanded use of its gene therapy for patients with Duchenne muscular dystrophy aged four and older.
Market Overview and Future Outlook
Despite the day’s mixed results, all three major Wall Street indexes were on track for weekly gains. The S&P 500 briefly crossed the 5,500-point milestone during Thursday’s session. However, declining issues outnumbered the NYSE and Nasdaq advancers, reflecting underlying market uncertainty.
Investors remain optimistic as the market adjusts to evolving economic conditions and interest rate expectations. Tech stocks’ resilience and encouraging business activity data provide a positive outlook, but volatility remains a crucial factor to watch in the coming weeks.
