Tech pullback drags Wall Street stocks lower

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U.S. technology stocks edged lower on Friday as investors pulled away from companies that have driven the market higher for most of this year.

The S&P 500, Wall Street’s main equity benchmark, fell 1.6 percent in afternoon trading Friday, while the tech-heavy Nasdaq fell 2.2 percent. Elon Musk’s electric-car maker Tesla was the biggest laggard, falling 4.4 percent, while chipmaker Nvidia fell nearly 3 percent.

Tech stocks have rallied strongly this year, as investors hedged their bets Artificial intelligence Demand for everything from servers to microchips will increase. The gains accelerated after Donald Trump’s election victory in November on bets that the president-elect will adopt more business-friendly policies when he takes office next month.

However, the sector has been choppier in recent weeks as investors reassess their best-performing holdings at the end of the year. The Federal Reserve also caused a stir last week when it forecast just two quarter-point rate cuts next year, compared to its forecast of four in September. High rates typically taint the appeal of holding shares in fast-growing companies.

Citigroup analysts said Friday that while they still predict the S&P 500 will rise about 10 percent from current levels by the end of next year, they expect “a more volatile leg of the bull market ahead.”

The US bank noted that this year’s gains in stock prices relative to corporate profits are “setting a high bar for fundamentals in the year ahead and even the year after”.

The S&P 500 is still up about 25 percent year-to-date after Friday’s pullback, roughly equaling the year-ago gain.

The so-called Magnificent 7 Big Tech stocks — Apple, Microsoft, Meta, Amazon, Alphabet, Nvidia and Tesla — account for about half of the S&P 500’s total return this year, including dividends, said Howard Silverblatt of S&P Dow Jones Index.

Magnificent 7 shares were all down on Friday, with Apple, Microsoft, Amazon and Meta each down at least 2 percent. Trading activity is typically lighter than usual during the holidays, something that can increase volatility.