Stocks on Wall Street experienced a notable decline on Friday, with major indices moving towards their first weekly loss in four weeks. The S&P 500 fell by 0.8% in afternoon trading, while the Dow Jones Industrial Average dropped 234 points, or 0.5%, by 13:50 Eastern time. The Nasdaq composite faced a more significant downturn, sliding by 1.4%.
Technology Stocks Weigh Down the Market
The decline was largely driven by technology stocks, particularly those with high valuations that significantly influence market direction. Among the major players, Nvidia saw a decline of 2.2%, while Broadcom fell by 4.2%. Despite the overall drop, there were more gainers than losers within the S&P 500, but the prominent tech names overshadowed this positive trend.
Market participants remained focused on the latest quarterly earnings reports from U.S. companies. Block, the parent company of Square and Cash App, reported results that fell short of analyst expectations, leading to an 8.4% decline in its share price. Conversely, Peloton surged by 7.7% after exceeding profit estimates, while Expedia Group experienced a remarkable jump of 17.3% following strong quarterly earnings.
Impact of the Government Shutdown
As the market contends with these earnings results, the ongoing U.S. government shutdown complicates matters. This shutdown, now the longest on record, has resulted in the absence of vital economic reports. Notably, the monthly employment data for October was unavailable, following the previous month’s absence of similar data. This lack of crucial information raises concerns, especially as the job market shows signs of weakening.
“Consumers are starting to get concerned about the potential effects of the government’s shutdown on economic activity,”
wrote Eugenio Aleman, chief economist for Raymond James, in a note to investors.
Adding to the unease, a recent report from the University of Michigan indicated that consumer sentiment fell sharply to a three-year low, contrary to economists’ expectations for a slight increase. The report also highlighted a slight rise in inflation expectations, an issue that remains a significant concern as inflation levels persist above the Federal Reserve’s target of 2%.
The absence of data regarding inflation and employment poses challenges for the Federal Reserve, which is adopting a cautious stance on interest rate cuts. The Fed has already implemented two cuts this year in an effort to stimulate economic growth amid a weakening job market. However, further cuts could exacerbate inflation at a time when it remains stubbornly high. Currently, Wall Street anticipates a 70% chance of another interest rate cut at 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 also decreased, settling at 3.54% from 3.56% the previous day.
International markets mirrored Wall Street’s decline, with European indices falling and Asian markets closing lower. In China, exports contracted by 1.1% in October, with shipments to the United States declining by 25% compared to the previous year. Despite this contraction, some economists remain optimistic, anticipating recovery following recent discussions between U.S. President Donald Trump and Chinese leader Xi Jinping aimed at de-escalating trade tensions.
As Wall Street navigates these complex dynamics, investors continue to keenly monitor both corporate earnings and broader economic indicators to assess the market’s trajectory in the coming weeks.