Stocks Hit by Selloff in Technology Giants: Markets Wrap

(Bloomberg) — A selloff in the world’s biggest technology companies hit stocks at the end of a stellar year.

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In another session of light trading volume – which tends to magnify moves – the S&P 500 lost over 1% and the Nasdaq 100 slipped almost twice as much. Nearly every major industry slumped, with Tesla Inc. and Nvidia Corp. recorded the biggest losses among megacaps. This came after a rapid rise that saw the tech giants dubbed the “Magnificent Seven” account for more than half of the US stock benchmark’s performance in 2024.

“I think Santa Claus has already come, but that’s me. “Did you see the performance this year?” said Kenny Polcari of SlateStone Wealth. “It’s Friday, next week is another shortened holiday week, volumes will be low, movements will be exaggerated. Don’t make any major investment decisions this week.”

According to Tom Essaye of The Sevens Report, the mood is no longer euphoric and the markets will start the year with a much more balanced forecast from core investors – and that would be “a good thing as it reduces the risk of air pockets” but the advisors have largely ignored the recent volatility.

“It’s fair to say that this recent drop in stocks has tempered the euphoria of individual investors, but it hasn’t dented advisors’ sentiment,” he said. “And if we get bad policy news or Fed officials point to a ‘pause’ in rate cuts, that will likely lead to further short, sharp declines.”

The S&P 500 fell 1.3%. The Nasdaq 100 slipped 1.8%. The Dow Jones Industrial Average slipped 0.9%. A Bloomberg assessment of “Magnificent Seven” stocks fell 2.4%. The Russell 2000 small-cap index fell 1.6%.

The yield on 10-year government bonds remained little changed at 4.58%. The Bloomberg Dollar Spot Index fell 0.1%.

“Valuation alone is not a reason to be pessimistic, but it does impact the risk-reward ratio in the short term,” said John Belton of Gabelli Funds. “Conclusion: Next year we will be a little more cautious with stocks than with our positioning. Credible reasons to be excited, balanced by high valuations and a host of unknowns.”

This year’s rally in U.S. stocks has pushed stock expectations so high that it could prove to be the biggest hurdle to further gains in the new year.

The bar is even higher for technology stocks given their massive rally this year.

A Bloomberg Intelligence analysis recently found that analysts expect earnings growth of nearly 30% for the sector next year. However, the technology sector’s market capitalization share of the S&P 500 index suggests that stocks may have growth expectations closer to 40%.

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