Technology Sector Weakness Weighs on US Stock Markets
Technology shares experienced a dip, dragging the S&P 500 and Nasdaq indices slightly lower on Friday. Notably, Nvidia shares fell by over 3%, marking a substantial impact on both indexes and significantly influencing the tech sector. Despite this decline, Nvidia continues to perform impressively with an approximate 155% increase this year due to a surge in AI-related stocks.
Key Players in the Market
Nvidia's fall led to a loss exceeding $220 billion in value over two days. Additionally, Apple shares also saw a decline, contributing to the overall market pullback.
- The Dow Jones Industrial Average saw a slight increase of 0.04%.
- The S&P 500 dropped by 0.16%.
- The Nasdaq Composite decreased by 0.18%.
However, the week ended on a positive note with the Dow gaining 1.44%, marking its largest weekly percentage gain since mid-May. The S&P 500 rose by 0.61%, achieving its third consecutive weekly advance. Similarly, the Nasdaq rose by 0.003%, securing its third straight weekly advance. US Treasury 10-year yields remained stable at 4.25%.
Investor Sentiments and Market Psychology
Some analysts attribute the recent sell-off to "soft data" that failed to excite investors. However, others suggest it might be driven by investor psychology surrounding the approaching 20,000 level for the Nasdaq 100. As stocks continue to break records, there is a sentiment that valuations might be overstretched, leading investors to consider taking profits.
Driving Factors Behind Market Movements
Wall Street's significant gains in the later part of 2023 have been primarily driven by companies like Nvidia, along with other major stocks linked to artificial intelligence. Although market value for Nvidia surged to over $3.4 trillion on Tuesday, surpassing major tech giants such as Microsoft and Apple, some analysts are skeptical about the sustainability of these valuation increases.
Currency and Market Dynamics
The U.S. dollar hit its highest level since early May as U.S. business activity reached a 26-month high in June, fueled by a recovery in employment. As per recent data, the Flash services PMI increased to 55.1, and the manufacturing PMI edged up to 51.7 – both indicating expansion.
The EUR-USD pair recovered to 1.07, alleviating fears of previous massive sell-offs as investors digest recent political scenarios in France.
Triple Witching Event
Friday also witnessed the triple witching event – the simultaneous expiration of stock options, stock index options, and stock index futures. This resulted in a massive volume spike at the close of trading, with an estimated $5.5 trillion worth of options expiring. Nearly 18 billion shares were traded on U.S. exchanges, marking a 55% increase over the three-month average.
This spike in trading corresponds with the market's strategic positioning for the second half of 2024 and anticipates the next moves by the Federal Reserve.
In summary, while the technology sector has experienced some turbulence, ongoing investor psychology and strategic market positioning continue to shape the evolving landscape of the U.S. stock markets.
