The S&P 500 faced a significant downturn on Friday, wrapping up the week on a lower note just one day following its record-high closing. The decline was largely driven by a marked rotation away from technology stocks, which had previously buoyed the market. This shift in investor sentiment overshadowed the optimism seen earlier in the week after the Federal Reserve implemented its third interest rate cut of the year.
For the week, the S&P 500 experienced a loss of approximately 0.6%, while the tech-oriented Nasdaq dropped by 1.6%, breaking its two-week streak of gains. In contrast, the Dow Jones Industrial Average experienced a slight uptick of 1% across the week, marking its third consecutive weekly gain, buoyed by stronger performances from sectors such as materials, financials, and industrials. Despite December typically being a robust month for stocks, both the S&P 500 and Nasdaq are currently down by 0.3% and 0.7% respectively, while the Dow has posted an increase of nearly 1.6%.
Investors are now looking towards the potential of a “Santa Claus rally,” a seasonal effect where stocks historically rally in the last five trading days of the year and the first two of the new year, expected to commence on December 19.
Several key developments influenced the stock market last week:
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Broadcom Concerns: The market faced significant pressure on Friday, spurred by a steep 11.5% drop in Broadcom shares. Despite delivering strong quarterly results, comments made by management during the earnings call led to misinterpretations that heightened fears regarding AI stock valuations. CNBC’s Jim Cramer weighed in, suggesting that the dip could represent a buying opportunity, noting Broadcom as the worst performer for the week, followed closely by Meta Platforms and Nvidia.
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Oracle’s Faltering Sales: Oracle encountered a rough session on Friday, following an 11% plunge in its shares on Thursday due to disappointing quarterly sales, guidance, and heightened spending forecasts. The situation further deteriorated when reports emerged that Oracle was extending the completion dates for data centers intended for OpenAI, despite Oracle’s claims of staying on track with milestones.
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Nvidia Gains Approval: Amid the turmoil, Nvidia received a positive development when it was allowed to ship its H200 chips to approved customers in China, following a statement from former President Donald Trump. While the company has faced scrutiny over AI trade, the approval may bolster its position in the market, especially in light of China’s previous disinterest in its H20 chips.
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GE Vernova’s Strong Guidance: On a brighter note, GE Vernova stood out as a top performer, despite a decline of 4.6% on Friday. The energy equipment firm received investor accolades, culminating in a record-high close Wednesday based on optimistic long-term guidance extending into fiscal 2028. This positive outlook was reinforced by CEO Scott Strazik’s comments on growth prospects during an investor meeting. Analysts have also raised the price target for GE Vernova to $800 per share.
With fluctuating market dynamics and sector rotations, analysts are keeping a close eye on forthcoming developments as the year draws to a close, pondering the potential for a holiday rally and the implications it may have for investors.
