The S&P 500 and Nasdaq Composite ended Friday’s session slightly lower, largely due to a continued decline in Nvidia shares, which impacted the broader technology sector for the second consecutive day. Nvidia’s downturn significantly influenced market dynamics, as technology emerged as the biggest loser among the 11 major S&P 500 sectors, dropping 0.84%. In contrast, communication services led the day’s gains.
Michael Green, chief strategist at Simplify Asset Management in Philadelphia, encapsulated the market sentiment, stating, “It’s Nvidia’s game, and the rest of us are just pretending to be here.” Green highlighted the concentrated trading activity in Nvidia call options, with seven million contracts traded, a volume that vastly exceeds typical market activity from five years ago.
Despite the tech slump, the Dow Jones Industrial Average edged up 15.57 points, or 0.04%, to 39,150.33. The S&P 500 slipped 8.55 points, or 0.16%, to 5,464.62, and the Nasdaq Composite declined 32.23 points, or 0.18%, to 17,689.36. Among the megacaps, Microsoft, Alphabet, and Amazon.com saw modest gains ranging from 0.92% to 1.89%, while Apple shares dipped 1.04%.
Zachary Hill, head of portfolio management at Horizon Investments in Charlotte, North Carolina, commented on the market’s overall performance, noting, “We’ve had a very strong run, especially in the S&P over the last couple weeks. So not surprised to see things kind of take a pause and settle down.”
Friday’s trading was notably volatile due to triple witching, which involves the simultaneous expiration of stock options, stock index options, and stock index futures.
In broader economic news, U.S. business activity surged to a 26-month high in June, driven by a rebound in employment and easing price pressures, suggesting that the recent inflation slowdown might continue. The flash services PMI rose to 55.1, surpassing expectations of 53.7, while the manufacturing PMI increased slightly to 51.7, against expectations of a dip to 51.
Despite this positive economic backdrop, May home sales fell slightly to a seasonally adjusted annual rate of 4.11 million units, slightly below the forecast of 4.10 million units. Market speculation continues around potential interest rate cuts, with money markets pricing in a 58% chance of a 25-basis point rate cut in September, and anticipating two rate cuts by the end of the year, according to LSEG’s FedWatch data.
Nvidia’s shares dropped 3.22%, contributing to declines in other semiconductor stocks, including Qualcomm, Broadcom, and Micron Technology, which fell between 1.36% and 4.38%. This recent pullback raises questions among analysts about the sustainability of the strong valuation increases seen in AI-linked stocks.
In other corporate news, Spirit AeroSystems saw its shares jump 6.00% following a Reuters report suggesting Boeing is nearing a deal to repurchase the airplane parts supplier. Sarepta Therapeutics soared 30.14% after the U.S. FDA approved expanded use of its gene therapy for patients with Duchenne muscular dystrophy aged four and older.
Overall, declining issues slightly outnumbered advancing ones on the NYSE by a 1.03-to-1 ratio. There were 98 new highs and 73 new lows on the NYSE, while the S&P 500 recorded 23 new 52-week highs and 2 new lows. The Nasdaq Composite saw 34 new highs and 186 new lows. Trading volume on U.S. exchanges totaled 17.68 billion shares, significantly higher than the 12.05 billion average for the last 20 trading days.
