BusinessTech-related Stocks Drag Down Wall St as Investors Evaluate Interest Rate Future

Tech-related Stocks Drag Down Wall St as Investors Evaluate Interest Rate Future

Tech Stocks Lead Wall Street Decline as Investors Evaluate Rate Outlook
© Reuters. FILE PHOTO: Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., March 5, 2024. REUTERS/Brendan McDermid/FILE PHOTO

By Caroline Valetkevitch

In New York, U.S. stocks experienced a decline on Friday, primarily driven by technology-related giants that have been essential in driving the rally this year. The situation prompted investors to carefully assess the outlook for interest rates ahead of the upcoming Federal Reserve meeting.

Following the release of data showing higher-than-expected inflation levels this week, traders have tempered their expectations for a potential rate cut by the Fed in June.

Notably, Adobe (NASDAQ:) saw a significant drop of 13.7% after announcing second-quarter revenue projections below analyst expectations. This was attributed to tough competition and decreased demand for its AI-infused photography, illustration, and video products.

The tech index experienced a decline of 1.3% during the day, leading the overall downturn among sectors. Companies like Microsoft (NASDAQ:) also faced a 2.1% decrease, contributing to the negative trend.

Furthermore, the semiconductor index dropped by 0.5% on Friday, marking its most substantial weekly percentage decrease since the start of the year. The upcoming Nvidia (NASDAQ:) GTC developer conference from March 18 to 21 will be closely watched for any AI-related announcements.

According to Rick Meckler, a partner at Cherry Lane Investments in New Vernon, New Jersey, there is a prevailing sentiment that interest rates will eventually be lowered. Although the timeline for this adjustment keeps shifting, investors remain convinced that it is inevitable.

The Dow Jones Industrial Average fell by 190.89 points, equivalent to a 0.49% decrease, settling at 38,714.77. Similarly, the S&P 500 and the Nasdaq dropped by 0.65% and 0.96%, respectively.

For the week, major indexes experienced marginal declines: the Dow by 0.02%, the S&P 500 by 0.1%, and the Nasdaq by 0.7%. Additionally, the small-cap index suffered a 2.1% drop over the week.

Friday was also marked by the simultaneous expiration of quarterly derivatives contracts associated with stocks, index options, and futures, also known as “triple witching,” a development that typically boosts trading volume.

Regarding trading activity, Friday witnessed the highest volume of the year on U.S. exchanges, with 18.76 billion shares changing hands. This significantly exceeded the average volume of about 12.4 billion shares during a full trading session over the past 20 days.

At the start of the week, investors’ options primarily favored call contracts, typically indicative of a bullish stance, as highlighted by Kochuba, the founder of analytic service SpotGamma. However, the failure of the S&P 500 to make significant gains led to a decline in the value of these call options, exerting downward pressure on the market.

Despite the AI-driven rally on Wall Street losing momentum, the S&P 500 still remains up by 7.3% year-to-date.

On the economic front, data released on Friday revealed that production in U.S. factories saw a higher-than-expected increase in February. However, the figures for January were sharply revised downwards, underscoring the ongoing challenges posed by elevated interest rates on the manufacturing sector.

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