This post was originally published on this site
The Nasdaq tumbled almost 2% on Friday as investors ditched on one of the most profitable trades of the year so far. Large tech stalwarts such as Facebook, Google parent Alphabet, Amazon and Apple all fell more than 3%, while Microsoft slipped 2.3% after Goldman Sachs declared that these five companies’ recent stellar outperformance was potentially overheated. Semiconductors, who make chips for these tech-behemoths, also fell.
The tech selloff triggered market turbulence, with Friday marking the second-busiest trading day for this year. The S&P 500 also edged downward. However, the Dow bucked the declining trade and closed at a record high on Friday. Similarly, only the Dow ended the week with gains among the major benchmarks.
For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article.
The Dow Jones Industrial Average (DJI) advanced 0.4% to a record close at 21,271.97 after touching an intraday record. The S&P 500 fell 0.1% to close at 2,431.77. The tech-laden Nasdaq Composite Index declined 1.8% to close at 6,207.92. A total of around 8.7 billion shares were traded on Friday, higher than the last 20-session average of 6.7 billion shares. The fear-gauge CBOE Volatility Index (VIX) rose to trade at near 10.7 on Friday. Advancers outnumbered declining stocks on the NYSE by a 1.68 to 1 ratio.
Technology Shares Dragged Down Nasdaq
Nasdaq finished lower on Friday after retreating from a record high, weighed down by technology shares. Investors digested a report from Goldman Sachs (GS – Free Report) on technology valuations that sparked selling of technology shares. The tech selloff also increased the market volatility with the VIX gaining more than 5% to finish at 10.70.
Technology shares suffered a major setback following the release of a report from Goldman Sachs which issued warnings on valuations of tech giants such as Facebook (FB – Free Report) , Amazon.com (AMZN – Free Report) , Apple (AAPL – Free Report) , Microsoft (MSFT – Free Report) and Alphabet (GOOGL – Free Report) .
Goldman Sachs also pointed out that the volatility in these five technology companies is less than not only the S&P 500, but also the utilities and staples sector. As per the report, tech stocks are less volatile, warning investors that they shouldn’t expect the tech stocks to continue to rally for long run. Shares of Apple declined almost 4%, marking its biggest decline since January 2016.
Additionally, a report released from Bloomberg News which highlighted that iPhones would use modem chips with slower download speeds compared to some of its peers’ smartphones also had an adverse impact on investor confidence.
The sharp decline of technology shares, led by drop in shares of Facebook, Amazon, Apple, Microsoft and Alphabet had a negative impact on the broader markets. The broader Technology Select Sector SPDR (XLK) fell 2.5%, and emerged as the worst performing sector of S&P 500. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
Financials and Energy Shares Gain
Financials gained on Friday, following heighened expectations about rate hikes taking place after the Fed meeting scheduled to occur this week. Banks are the first gainers when central bank raises key interest rates. The broader Financials Select Sector SPDR (XLF) advanced 1.9%, emerging as one of the best performing sector of S&P 500. Some of its key holdings including Bank of America Corp (BAC – Free Report) and Goldman Sachs Group gained 3.1% and 1.7% respectively.
Meanwhile, WTI crude prices gained by $0.19, or 0.4%, to $45.83 a barrel. The broader Energy Select Sector SPDR (XLE) increased 2.4%.The gains in financial and energy shares helped to trim some losses in the broader markets.
For the week, the Nasdaq and the S&P 500 declined 1.6% and 0.3% respectively while the Dow registered a gain of 0.3%. On Thursday, James Comey’s testimony concluded without any major revelations and the European Central Bank hinted no more interest rate cuts were forthcoming in the short term. Meanwhile, Prime Minister Theresa May’s Conservative party failed to secure a parliamentary majority coming up with 318 seats out of 650. Additionally, investors also digested the Labor Department’s seasonally adjusted initial claims report which fell to 245,000 in the week ending June 3.
Stocks that made Headlines
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don’t buy now, you may kick yourself in 2020. Click here for the 6 trades >>